FHA Mortgage Insurance Changes – Now in effect! - Home Loan Experts with Great Mortgage Rates Serving Colorado, Florida, Illinois, Indiana, Michigan, Minnesota, Tennessee and Wisconsin

Wednesday, April 3, 2013

FHA Mortgage Insurance Changes – Now in effect!

As of April 1, 2013, FHA changes to mortgage insurance premiums are now in effect. Here is a brief summary of the recent changes and how they affect current and future FHA borrowers.

First, a quick overview on how mortgage insurance for FHA loans works. For every FHA transaction, both purchase and refinance, there are two forms of mortgage insurance associated with the loan. There is the upfront mortgage insurance, which is a percentage of equity, taken out of your current equity, which results in an increased principal balance. In addition, there is monthly mortgage insurance, which is tacked on to your monthly payment.

Prior to April 1, 2013, here is what the mortgage insurance structure looked like:

LTV Upfront MI Monthly MI
<=95% 1.75% 120bps
>95% 1.75% 120bps

Here are what new changes look like:

LTV Upfront MI Monthly MI
<=95% 1.75% 130bps
>95% 1.75% 130bps

The upfront mortgage insurance premium has not changed, but the monthly mortgage insurance premium has increased by 10bps, which will increase costs for FHA borrowers. FHA is certainly still a viable program option, even with these changes, but don’t rule out conventional financing. Mortgage insurance premiums for conventional programs can be half the price and there will be no reduction in equity at the end of the transaction.

Another thing to keep in mind is that FHA is rolling out even more changes on June 1, 2013. Any FHA loan with a case number assigned after June 1, 2013 will be subject to monthly mortgage insurance over the life of the loan. Currently, borrowers are able to cancel their mortgage insurance when they have 20% equity in their home, but under the new FHA regulations, that will not be in option.

With the frequent industry changes, it is important to work with a lender that is knowledgeable and up to date. Mortgage bankers at United Home Loans specialize in exploring all program options to determine the best fit for each of our borrowers. We understand that every loan is unique, and we do our best to meet the financial needs and goals of our borrowers.

Illinois Mortgage Rates
IL 30 Year FHA mortgage as of April 3, 2013 3.250%/3.292 APR

Please click this link for APR assumptions and more IL mortgage rates

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