FHA Loan Articles
News, updates, and explanations to keep you informed.
Up Front Mortgage Insurance Premium Changes for FHA Loans
When buyers are approved for FHA home loans, they are required to carry mortgage insurance. That includes both a Mortgage Insurance Premium (MIP) and an Up Front Mortgage Insurance Payment (UFMIP). The Upfront Mortgage Insurance Premium payments go into an escrow account set up by the U.S. Treasury Department and the funds are used to protect the government in case the borrower defaults on the FHA loan.
In the past the UFMIP on some FHA loans was as low as 1.5 percent, but effective April 5, 2010, the FHA has new amounts for Up Front Mortgage Insurance Premiums on many traditional and refinance loans from the FHA.
All affected FHA loans with case numbers assigned after April 5, 2010 will incur an Upfront Mortgage Insurance premium of 2.25 percent.
This change means an increase in premiums for those looking for purchase money loans, plus existing FHA mortgage holders interested in refinancing. The increase affects FHA-to-FHA and "non-credit qualifying" refinancing.
The FHA says these changes do not affect annual premiums at this time; the latest policy information from the FHA says for traditional and refinance loans, the annual premium is to be paid monthly and is charged according to the length of the FHA loan, and loan-to-value ratio. Check with your loan officer for payment schedule information for your specific FHA home loan. Most FHA loans are affected by the new 2.5 percent UFMIP, but there are a few exceptions.
TITLE I, HECM, AND HOPE FOR HOMEOWNERS
The increase in UFMIP does NOT affect Title I mortgages or Home Equity Conversion Mortgages, also known as HECM loans. Hope For Homeowners loans are also unaffected by the UFMIP increase.
If you have a Section 247 (Hawaiian Homelands), a Section 248 (Indian Reservations) your loan is unaffected by the UFMIP change. Section 223(e) (declining neighborhoods) and Section 238(c) (Military Impact areas in New York ad Georgia) are also unaffected.
HOW DO UPFRONT MORTGAGE INSURANCE PEREMIUMS WORK?
The FHA charges an insurance premium up front, which is equal to a percentage of your mortgage. For purchase money FHA loans and full credit qualifying refinance FHA loans, the amount is 2.25 percent. FHA Streamline refinance loans are also charged a UFMIP of 2.25 percent.
HOPE for Homeowners pay 2.0 percent and Home Equity Conversion Mortgages are also charged 2.0 percent according to the new guidelines.
FHA NEWS and RELATED ARTICLES
One type of question that sometimes arises about FHA loans-- Is there a no-credit-check version of an FHA mortgage loan? What is the criteria required for FHA loans that do not require a credit check and/or appraisal?
One not-so-common question about FHA loans still comes up often enough to discuss in detail. Some FHA loan applicants want to know if they can purchase a residence from another family member using an FHA insured mortgage.
Except for obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios if certain conditions are met.
Some FHA borrowers have questions about applying for an FHA loan after experiencing a short sale on a previous home. The FHA loan rules found in HUD 4155.1 have the answers for borrowers applying for an FHA mortgage after a short sale.
The FHA and HUD issued new rules for mortgage insurance designed to add fiscal security to the loan program, and when those rule changed the new guidelines were published in Mortgagee Letter 2013-04.