FHA requirements include mortgage insurance for FHA loans to protect lenders against losses that result from defaults on home mortgages.
FHA Requirements: Mortgage Insurance
Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance primarily for borrowers making a down payment of less than 20 percent.
New FHA Annual Mortgage Insurance Premium
President Obama signed a bill in August of 2010 giving HUD the flexibility to increase Annual Mortgage Insurance Premiums. According to Mortgagee Letter 11-10, the increase in Annual Mortgage Insurance Premiums will be effective for all case numbers dated on or after April 18th 2011.
HUD is implementing a 25 basis point increase in the annual premium for terms of greater than 15 years and equal to or less than 15 years. On loans with greater than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 5%, the new Annual Premium is 110 basis points (bps). If the down payment is less than 5%, the new Annual Premium is 115 basis points (bps).
On loans equal to or less than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 10%, there will not be any MIP charged. If the down payment is less than 10%, the new Annual Premium is 50 basis points (bps).
Upfront Mortgage Insurance Premium
Effective for loans on or after October 4th, 2010, for FHA regular purchases and refinance products, the Upfront Mortgage Insurance Premium is 1.00%, which decreased from 1.5%. This amount remains unchanged.
FHA's monthly mortgage insurance payments will be automatically terminated when these conditions occur:
- For mortgages with terms 15 years and less and with Loan to Value ratios 90 percent and greater, annual premiums will be canceled when the Loan to Value ratio reaches 78 percent regardless of the amount of time the mortgagor has paid the premiums.
- For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78 percent, provided the mortgagor has paid the annual premium for at least 5 years.
- Mortgages with terms 15 years and less and with loan to value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.
FHA NEWS and RELATED ARTICLES
One commonly asked FHA loan question involves down payment requirements. Many people want to know what the FHA loan down payment rules are for a particular state or zip code. A home is not eligible for an FHA loan unless it has adequate, dedicated areas for sleeping and cooking--things most house hunters would take for granted. Homes not designed with such areas can’t qualify for an FHA mortgage as-is. When an FHA borrower applies for a loan and the spouse does not co-sign or co-borrow, are there situations where the spouse would be obliged to sign loan documents? It’s a commonly asked question in states where community property laws exist.ADDITIONAL ARTICLES
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