Market Updates

FHA Mortgage Monthly Insurance Premiums Are Increasing April 1, 2013

FHA Mortgage Monthly Insurance Premiums Are Increasing April 1, 2013

FHA has confirmed that the Monthly Mortgage Insurance Premiums (MIP) Are Increasing for the home loans it insures effective April1, 2013.

If you are sitting on the fence deciding whether to buy a new home this spring,
Now Is the Time to Buy. It’s going to get more expensive as the year progresses.

1.   Beginning April 1, 2013, FHA Monthly Mortgage Insurance Premiums Are Increasing by .10%
         •   For loans with down payment of between 3.5  and 5.0%, the MIP will increase
              from 1.25%  to 1.35%
         •   On loans with a down payment of more than 5.0%, the MIP will increase from
              1.20% to 1.30% 
            ◊   The increase will add about $13 a month to the payment on a $150,000 loan.
                  Not a lot … But it will affect buyers Debt-to-income (DTI) ratios and could
                  prevent some  buyers from qualifying for mortgages they might have
                  qualified for prior to the change

2.    FHA will also eliminate the cancellation of these premiums when the loan is paid down to 78% of the original appraised value.
         •   For loans with less than a 10% down payment, the MIP will be required to be paid for the entire 30 year term of the mortgage.
            ◊   The new monthly MI premium on a $150,000 FHA mortgage will be about $160.00 per month. Buyers with just a 3.5% down payment – even those putting 10% down – will pay this premium for the entire term of the loan … without regard to the value of the home and the decreasing balance on the loan in years to come.
            ◊   Do the math … that’s an additional $38,400 a home owner will have to pay in insurance premiums over a 30 year period

Remember, this is the 2nd FHA Monthly Mortgage Insurance Premium Increase  in 12 months. Last year’s 0.10% increase was mandated by the Temporary Payroll Tax Cut Act signed by President Obama in 2011. The Act has expired, but the premiums continue. This time the increase is needed to shore up FHA’s capital reserves which are in jeopardy of default.

Personally I think that FHA’s Monthly Mortgage Insurance Premiums Increase is a step backwards for the Real Estate Market.  
HUD and FHA claim their mission is to create a strong, sustainable housing market that will bolster the economy and protect the consumers. First Home Buyers will feel the impact of these changes and present a barrier to home ownership.  That’s ironic because the new administration claims to be an advocate of medium income households. Strange way to show support?

Bottom Line: The housing market is beginning to see an increase in home sale. This will beDon't sit on fence tempered by an increase in home prices and the expected increase in mortgage rates. Now is the time to consider conventional financing as a viable mortgage option and a take a hard look at other mortgage programs with lower down payment requirements and cheaper MI

Call Me @ 860.945.9284 to discuss the right mortgage option for your family and to take advantage of my FREE Mortgage Pre-Approval service. We’re licensed in all 6 New England states; NY and FL too. I’m here to help.