Changes to FHA Insurance Premiums
Changes to FHA Insurance Premiums went into effective with FHA Case Numbers assigned on or after October 4, 2010. Why? FHA loans are originated by residential lenders but insured against borrower default by the government. In the past, when FHA loans were a small share of the market, its capital reserves for loan losses was well funded; this is no longer the case. Capital reserves have dropped as defaults have consistently risen, leading FHA to implement changes to pricing of the one-time upfront insurance premium and annual insurance payments, with the ultimate goal of restoring its capital reserves to adequate levels.
For amortization terms greater than 15yrs/180mths, the Annual Mortgage Insurance premium will increase accordingly:
0.85% for loans with LTV’s </= 95%
0.90% for loans with LTV’s > 95%
What does this mean? Monthly payments will increase because of higher annual premium.
The Upfront premium will be lowered from 2.25% to 1.00%. What does this mean? The reduction in upfront premium will reduce overall loan amount.
How does this affect your transaction? Although you will be financing less, your overall monthly payment will increase. If applicable, affecting debt to income ratio in qualifying for an FHA mortgage.
For more information call Natasha Cartagena at 407-234-8504, or visit Shelter Mortgage.
Special thanks to Natasha at Shelter Mortgage for providing this guest post.