FHA MIP Changes Effective April 18 2011
Its only a week away for yet another change which will effect homebuyers in Frisco Texas.
A few weeks back, it was announced within HUD Mortgagee Letter 2011-10 that there would be an increase in the Annual Mortgage Insurance Premium for all new FHA Case Numbers assigned on or after April 18, 2011.
If you recall, there were changes to the Mortgage Insurance Premium back in October 2010 which changed the UFMIP (UpFront Mortgage Insurance Premium) from 2.25% to 1%. That was great news, except that the Annual Mortgage Insurance Premium increased from .55% up to .90% (depending on the Loan To Value ratio).
So, how will this new change effect Homebuyers as of April 18th? Well, the good news is that the Upfront Mortgage Insurance Premium will not incease. It will remain at 1% of the Loan Balance.
The change is specific to the Annual Mortgage Insurance Premium which is increasing 25 BPS (or .25%). Below is a snap shot from the Mortgagee Letter 2011-10:
For a homebuyer, this means that your payment is going to increase on a monthly basis. If your principal balance is $180,000 with a 96.5% Loan-to-Value, your MIP payment would increase from $135.00 a month to $172.50 ($37.50 extra per month).
If you have would prefer not to have your payment increased, you only have two options. The first option is to have an offer accepted and your mortgage loan originator to create a FHA Case Number prior to April 18th. This is only suggested IF you already know the house of your dreams. Do not feel rushed to make a decision.
The second option is to look for a home that is slightly less costly. For example, instead of a home for $180,000, you could choose a home for $172,800.
This scenario may not fit your specific Texas home loan. Feel free to contact me to discuss your financial situation further.
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Are you looking to purchase a Texas home? Perhaps you love your Texas home but would be interested in refinancing your Texas mortgage to a lower interest rate?
I'll help you get pre-approved for your Texas home loan and even suggest some very knowledgeable and professional Real Estate Agents in your area of choice. If you are available to talk, I am available to listen. Give me a call or visit my website for more details.
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John R Cannata P#214.728.0449
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The views expressed on this site are mine alone and do not reflect the views of my employer.
It seems that the housing industry is getting hit from all sides weakening the current improvement trend; change is not always good.
Thanks John, for a clear and concise explanation of the MIP increase.
Some would lament that due to the increase, a Buyer will get less house (in your example, principal loan of $172,800 vs. $180,000). But with house prices going down in almost every area of the Nation, the Buyers may still be able to purchase "the same house".
You've made this very clear and easy to understand. I imagine the situation will lead to buyers offering less for the same home in order to offset costs. With the shadow inventory in Tucson, it doesn't really look optimistic for the home seller as of yet. I still see quite a few vacant homes that are NOT on the market in my Marana neighborhood alone. How are the market value trends looking in your area in Texas?
Teral - You are so right. Some changes are just not welcome. :-)
Fred - We can only hope that the buyers would be able to negotiate the house down. Thats the ideal scenario for a home buyer for sure.
Cara - It all depends on the area. We've seen some neighborhoods actually increase over the past year but many others have still dropped down due to Foreclosures and short sales. Its certainly not as bad as many other states, but we are not out of the woods yet. I agree with you that it wont be great for sellers in many areas/states.
John,
Thanks for keeping us informed. Very good information
Thanks Lloyd. It helps me keep it all straight too. :-)
Great information and easy to follow visuals/examples. Good information to know and thanks for the heads up and suggestions.
Love all the details on this post with all the increases John. It seems it is getting harder and harder to afford a home these days.
Thanks Connie. I appreciate the comment.
Gary, you have that right. The changes that take place are making it harder and more expensive.
John,
Thanks for the reminder, and the chart. I will have to update how I teach this part of finance.
You are very welcome Richard!
John - Thanks for sharing and giving everyone an example of how much this really affects a buyers mortgage.
John Thank you for the perspective - to some the increase can be dramatically negative. but it is what it is
Thanks Michelle.
Karen - You are right.. it is what it is.. we just have to work with it and move on.