Effective with FHA case numbers assigned on or after April 18, 2011 the annual MI premiums will increase by 25 bps. (FHA Forward Mortgages only)

The following table will give you a snapshot of the changes:

Loans > 15 Years (30yr fixed)

• ≤ 95% – Before 85 bps NOW 110 bps
• > 95% – Before 90 bps NOW 115 bps

Loans ≤ 15 years

• ≤ 90% – Before None NOW 25 bps
• >90% – Before 25 bps NOW 50 bps

This means that on a $200,000 30 year FHA loan the monthly premium will increase by approximately $42.00.

A couple of things to consider…

• There are no changes to the Up-Front Mortgage Insurance Premiums (UFMIP)
• The change is effective with FHA case numbers assigned on or after April 18, 2011
• 15 year FHA loans with LTV’s below 90% remain at -0- annual MI

Please contact me if you have any questions or need additional information.

FHA received congressional approval on August 5th to raise borrowers’ annual premiums for single-family mortgage insurance. Lawmakers gave the federal mortgage insurer enough leeway to increase the annual fee it charges borrowers three-fold, up to 1.55 percent. However, the annual premium is not going to go that high (thank god!). The annual mortgage insurance premium will increase from 0.55 percent to about 0.90 percent of the loan amount. At the same time, FHA will lower the upfront premium charged on the amount borrowed by 100 basis points from the current 2.25 percent.

Buyers should make their loan application ASAP to lenders so they can register the address and get their case number at the lower monthly premiums. This includes short sale offers. The new structure will result in a lower upfront premium but an increase in the annual premium which is paid monthly. This means monthly mortgage insurance on FHA loans will nearly double on October, 4th 2010. This also means that because it’s more expensive, you are going to lose purchasing power on Monday too.  Which means less house for your money.

If you or someone you know is looking to purchase a new home in the near future- NOW IS THE TIME to get a preapproval!  Get with your loan officer and get your FHA case number. If you aren’t working with anyone send me an email or stop by my website to get yours. Remember it has to be issued by Midnight Ocotober, 3rd 2010!

Securing an FHA mortgage in Washington is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.

For consumers, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

To read the FHA’s statement, it’s clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

To that end, the FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.

Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.

As a result, homebuyers in Beaverton should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”.  Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.

Some have other guideline overlays, too.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need an FHA home loan in the next few months, consider moving up your time-frame.

If nothing else, you’ll save some money at closing.