Feb 15, 2011
Given the legislative mandate in section 202 of the National Housing Act for ensuring that FHA’s Mutual Mortgage Insurance Fund (MMIF) remains financially sound, it was imperative to strengthen the MMIF to ensure that FHA will be able to continue providing a home financing vehicle and remain sound.
This hike will raise the premium from .9 percent to 1.15 percent of the loan amount, and is expected to generate $2 billion in funds for the agency. Unfortunately for some, this gain is expected to reduce the number of FHA backed loans available.
The chart below illustrates the 25 basis point (bps) increase in the Annual Mortgage Insurance Premiums. There are no changes to the Up-front Mortgage Insurance Premium (UFMIP).
Example of Annual Mortgage Insurance Premium Increase on FHA-backed loans
October 2010 - 90 bps
April 2011 - 115 bps
Sales Price $163,000
Minimum Down Payment (3.5%) $5,705
Mortgage Amount without UFMIP $157,295
FHA MIP current monthly payment...$118
FHA MIP effective monthly payment on April 18, 2011...$151
Change in payment (monthly)...$33
As you can see, it will cost you more to own a home. If you've been thinking about buying, now may be the time.