Florida Home Buyers and Investors Blog

HUD has released the date for the pending MIP (Mortgage Insurance Premium) increase and I wanted to make sure you were aware of this change.

What is changing is the ANNUAL premium on FHA loans. For a while now HUD has been putting out information that they will have to raise premiums to keep the insurance fund for FHA loans solvent and properly funded to continue to insure new FHA loans. With FHA (and VA) being the best low down payment programs out there, this change will affect a lot of homebuyers so I wanted to ensure you were well informed.

How much is the change? The annual premium will increase by .25% per year. That means that a buyer that was looking at .90% per year in FHA MIP premiums will now pay 1.15% per year. Since the approximate term for a FHA loan to hit the mandatory drop off point is roughly 10 years that means a pretty significant increase in overall costs. On a $200,000 loan the increase is $500 per year or $41.67 per month. For those whom are on the border of qualifying from a debt ratio perspective, that will also mean they have to qualify with the higher payment.

The good news about this change is…. THE FHA Insurance fund will remain viable and we should be able to rely on this great product for years to come. AND MIP is tax deductible just like mortgage interest.

What do I have to do to ensure I get the lower rate if they have found a home or are close to submitting an offer? HUD requires that the new premiums be implemented on all loans with FHA Case Numbers pulled on 4/18 or thereafter. If you are ready now or nearly ready (even if waiting on short sale approval) be sure your lender pulls the case number before April 18^th.