Do you have an FHA loan in Illinois, Michigan, Minnesota or Wisconsin? Make a smart decision in 201
While interest rates are still at historic lows, now is a great time to save money by refinancing. However, for FHA borrowers in the greater Chicago area and other markets, there are several other factors at play that can impact your overall savings.
The Department of Housing and Urban Development (HUD) has required each FHA borrower to pay mortgage insurance premiums on each FHA loan. There are two types of mortgage insurance premiums required by HUD, upfront mortgage insurance premium and monthly mortgage insurance premium (MIP). As HUD is constantly changing and adjusting the guidelines for these premiums, it can impact whether or not it makes sense to refinance.
The key date for an FHA refinance is June 1, 2009. FHA notes that were endorsed prior to that date (your endorsement date is typically a few weeks after closing date), now have lower mortgage insurance costs.
MIP requirements for FHA streamline loans endorsed prior to June 1, 2009
Up-front MIP = 0.01 percent
Annual (paid monthly) MIP = 0.55 percent
MIP requirements for FHA streamline loans endorsed after June 1, 2009
The MIP calculations for loans endorsed after June, 1 2009, can be somewhat confusing. It is important to note that that the MIP will vary based on term and loan to value ratio (percentage calculated by taking loan amount divided by value):
15-year FHA loan, LTV over 90 percent: 0.60 percent
15-year FHA loan, LTV under 90 percent: 0.35 percent
15-year fixed-rate loan with LTV of 78 percent or less : no annual MIP
30-year FHA loan, LTV over 95 percent: 1.25 percent
30-year FHA loan, LTV under 95 percent: 1.20 percent
It is important to take advantage of current interest rates, as we may never see them this low again. While refinancing can lead to long term savings, be sure to educate yourself to know when it makes sense for you as a borrower.
Choose a lender with experience and expertise. United Home Loans assists borrowers with FHA loans in Illinois, Michigan, Minnesota and Wisconsin.