Another increase to FHA mortgage insurance?

by

You know FHA mortgage insurance is high when the monthly premium and mortgage rates are both in the 2’s! Yes, that is right. FHA mortgage insurance premiums may increase again. I say “may” because we do not know for sure whether or not they will be increased. What we do know is that Congress approved a measure that will allow FHA to charge up to 2.05% for their annual mortgage insurance premiums.

Is 2.05% annually a lot? Yes, yes it is. That would be about double the cost of monthly mortgage insurance for conventional loans with 3% down (that program carries the highest mortgage insurance rates for conventional loans). It would also be the largest one time increase in the last several years. Here is a quick review of FHA mortgage insurance rates over the past few years using a $200,000 loan for comparison:

  • in 2008, the annual mortgage insurance rate was 0.50%, or $83 per month
  • in 2009, it increased to 0.55%, or $92 per month
  • in 2010, the increase went to 0.90%, or $150 per month
  • in 2011, mortgage insurance increased again to 1.10%, or $183 per month
  • the last increase was in 2012 when it jumped to 1.25%, or $208 per month

Just to put that into perspective, the monthly mortgage insurance in 2008 was $83 per month. For the same loan amount, it is now $208 per month. That is an increase of $125 per month.

What does 2.05% look like? For a 200,000 loan, the FHA monthly mortgage insurance would be $341 per month! Also, the latest act of Congress requires a minimum amount of 0.55% for FHA loans. Homeowners who bought a home with a 15 year fixed mortgage and a 22% down payment were exempt from the monthly mortgage insurance. This may no longer be the case.

Again, I’ve used the word “may” several times in this post because nothing is written in stone. All Congress has done is said that FHA can choose to increase mortgage insurance rates to 2.05% and establish a minimum on all FHA loans. As of this post, nothing has been officially announced.

What should you do? If you were thinking of buying a new home using an FHA loan, it would be a very, very good idea to buy that home prior to any additional changes taking place to the monthly mortgage insurance. With an annual increase each year for the past four years, one thing we know for sure is that FHA will increase it. The question is “when”, not “if.”

Looking to buy in the state of Georgia? If so, I’d be glad to help you get prequalified and ready to make an offer. Contact me today to get started!

Advertisements

Tags: , , , , , , , , , , , ,

3 Responses to “Another increase to FHA mortgage insurance?”

  1. FHA Exhausts Reserves « The Mortgage Blog Says:

    […] Fast forward a couple of years… with the increase in the number of FHA loans being originated coupled with the record number foreclosures, FHA was paying out way more than it was taking in from their mortgage insurance premiums. FHA knew this was coming and has worked to increase the amount of money coming in on the newly originated loans. FHA has increased the monthly mortgage insurance rate annually for the past several years, and looks…. […]

  2. Coming soon – FHA changes « The Mortgage Blog Says:

    […] several years, FHA has annually increased their monthly mortgage insurance. Toward the end of 2012, as posted here on this blog, FHA was given the approval to dramatically increase their monthly mortgage insurance. It seems the […]

  3. FHA changes officially announced « The Mortgage Blog Says:

    […] I mentioned earlier this month, FHA has indeed announced changes to their guidelines. While FHA was approved by Congress to increase their monthly mortgage insurance rates by roughly 60%, the actual increase […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: