By Dave Krichmar
Wednesday, February 6th, 2013
HUD has just come out with two minor changes to the Monthly Mortgage Insurance on FHA loans. And they go into effect April 1st, 2013 and May 6th, 2013. Here are the changes and an explanation of them.
Monthly Mortgage Insurance Amount
On all FHA loans with case numbers ordered on or after April 1st 2013, the monthly mortgage insurance will increase .10, for loan amounts under $625,000. Keep in mind in the Houston Texas Area the max FHA loan amount is $272,550. As an example, on a loan amount of $270,000 this would be a monthly payment increase of about $23.
The Length of Having Monthly Mortgage Insurance
On all FHA loans with case numbers ordered on or after May 6th 2013, the length of time to have monthly mortgage insurance will change in a minor way. In the past, most FHA loans would allow your monthly mortgage insurance to go away after 5yrs if you also had a loan to value of 78%. The loan to value of 78% means that you owe on your mortgage less than 78% of what your home is worth. This is now changing; if you get a FHA loan with a loan to value of 90%+ you will owe the monthly mortgage insurance for the life of the loan. As an example if you buy a home with a 30 year FHA loan and put a 3.5% down payment, you would owe your monthly mortgage for the entire 30yrs. If you get a FHA loan with a loan to value of 90% and less, the monthly mortgage insurance will stay on your loan for 11yrs. Really this change only effects those who reach a loan-to-value of 78%, however at that time, in many cases, we could refinance you into a conventional loan with no mortgage insurance.
FHA loans still allow many folks to get in a home with the lowest rate, lower down payment, higher debt to income ratio, and allow lower credit scores compared to conventional loans. Monthly Mortgage Insurance is also called MI or MIP. When getting a new FHA mortgage make sure you keep in mind the changes that go into effect April 1st and May 6th, 2013. And if you already have a FHA loan, these rules do not affect you.