Okie-dokie…they’ve gone and done it…FHA will be raising MORTGAGE INSURANCE beginning in April on all new FHA Home Loans.  The upfront mortgage insurance premium, UFMIP(the part that is usually financed into the new FHA loan), will be increasing to 1.75% (from 1.00%) and the annual 30 year term Mortgage Insurance will be increasing to 1.25% (from 1.15%) with a 95%> LTV and 1.20% (from 1.10%)  with <95% LTV.  Remember, the annual MI is divided by 12 for the monthly payment.  Take a look at the new chart…

FHA Annual Mortgage Insurance

Term > 15 Years
 Base Loan Amount
 LTV  Effective  Annual MIP
 Any Amount
 ≤ 95.00%  April 9, 2012  120 bps
 Any Amount
 > 95.00%  April 9, 2012  125 bps
 Term ≤ 15 Years with LTV above 78%
 Any Amount
 ≤ 90.00%  April 9, 2012  35 bps
 Any Amount
 > 90.00%  April 9, 2012  60 bps

However – On the flip side…If you are refinancing and existing FHA loan, the MI is reduced. For all SF Forward Streamline Refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009, (Psst…don’t tell anybody, but… 60% of ALL FHA loans began AFTER May 2009…) the UFMIP will decrease from 1 percent to 0.01 percent of the base loan amount. This change is effective for case numbers assigned on or after June 11, 2012. So we will be waiting until June for your Streamline Refi…hope rates hold…

Now for the biggie…and this will change just about everything. The spirit of FHA was to help first time homebuyers who had little down payment and not perfect credit. Old collection accounts were ok, especially Medical collection accounts, and my guess is that 75% of America has a medical collection account. FHA did not require collection accounts to be paid off as a condition of loan approval. But, not any longer. Here is the NEW guideline…

If the total outstanding balance of all collection accounts is equal to or greater than $1,000 the borrower must resolve the accounts (e.g. entered into payment arrangements with minimum three months verified payments- paid as agreed) or paid in full at the time of, or prior to closing.

Mortgagees must document the case binder showing each account was resolved or paid in full.If the total outstanding balance of all collection accounts is less than $1,000, the borrower is not required to pay off the collection accounts as a condition of mortgage approval. 

FHA continues to require judgments to be paid off before the mortgage loan is eligible for FHA insurance.

 

Did you read that twice – just to make sure? Now, more that ever, it is SUPREMELY important to have your financing lined up with an APPROVAL…not just a pre-qualification. The mortgage landscape and the real estate landscape have changed forever and the pendulum has swung as far away from 2004 to 2007 as it can when it comes to loan underwriting guidelines.

 

One way to avoid the increase is to have a completed sales contract and have your lender order the FHA commitment prior to April 1, 2012. If you plan on buying a home this spring, there is a reason to do it earlier rather than later.

 

www.PlanoMortgageGuy.com


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