FHA loan are becoming more popular as families deal with the after effects of the major economic depression that we saw only a few years ago. With conventional mortgage being more difficult to qualify for with previous credit issue, FHA has become the go to mortgage program for U.S. Families.
The Federal Housing Administration has experienced high delinquency rates throughout the past couple of years also. With the uptick in foreclosures and partial claim premiums from buyers not able to pay their payments on time, the administration is forced to again raise mortgage insurance premiums.
FHA Mortgage Insurance Premium Increases
The Federal Housing Administration (FHA) does not offer financing directly. Their role in mortgage lending is to insure private companies against losses. When a bank or mortgage company offer FHA financing they are using the administrations underwriting guidelines to pre-qualify and approve clients. If the borrower qualifies under such guidelines then the FHA will insure the lender against losses.
With billions of dollars of mortgage loans insured the FHA has a large responsibility to remain solvent and protect itself against future losses therefore it has an account called the Mutual Mortgage Insurance (MMI) fund. This fund is regulated by law and the FHA is required to maintain a 2% minimum reserve.
The FHA has dropped below their minimum requirements therefore they turn to new borrowers to cough up the coins to replenish it. The Federal Housing Administration has announced that it will be increasing Mortgage Insurance Premiums in the near future.
2013 Mortgage Insurance Premiums for FHA Loans
Starting April 1st, 2013, FHA mortgage insurance premiums (MIP) will increase 10 basis points annually of .10 percentage points. This increase in premiums will apply to all FHA loan terms including the 15-year-fixed-rate FHA loans.
FHA Streamline Refinance MIP
If your current loan is an FHA loan in which you took out prior to June 1st, 2009 then you may be in luck. The administration has allowed a lower premium amount for homeowners refinancing to lower their payments through a FHA streamline refinance mortgage.
FHA Streamline Refinance Mortgage insurance premiums will remain at.55 basis points or .0055 percentage points annually. The added bonus is that the up-front mortgage insurance premium will be only .01 basis points or .0001 percentage points.
Updates for Cancelling FHA Mortgage Insurance Premiums
Starting June 3rd, 2013 the FHA has announced that it will no longer allow MIP cancellation if the loan balance is higher than 90% of the home’s appraised value (>90% LTV). Currently homeowners are able to request cancellation of their monthly mortgage insurance once their loan balance reaches 78 percent of the home’s original appraised value when the loan was taken out.
For those homeowners whom are disciplined enough to have a 10% down payment and start of at 90% LTV or less, the mortgage insurance will continue for a minimum of 11 years. This chance starts mid-2013 and will have sweeping effects to the mortgage industry
How to Apply for an FHA mortgage
Despite the additional mortgage insurance premiums , FHA mortgage loans may still be the best option for a home purchase or refinance. Conventional loans still require a minimum of 7 years to have passed after a foreclosures while FHA may allow only 3 years after the sale date. This factor alone still has clients flocking towards FHA loans.
To check your FHA eligibility, and how the agency’s new rules may affect your finances, get started with a rate quote online or by calling the mortgage experts at Riverbank Finance today. If you get started before the April 1, 2013 deadline, you’ll be “grandfathered” in to the current, lower MIP rates.