FHA MIP Going Up Again

FHA mortgage insurance is called MIP (Mortgage Insurance Premium) and is collected two ways, up-front and per month.  Over the last few years, FHA has already increased the MIP several times.  Unfortunately, they are back at it again.  Effective with all case numbers assigned on or after April 1st, the up-front MIP is increasing from 1% to 1.75% and the monthly MIP is increasing from 1.15% to 1.25% (this is an annual % which you multiply times the loan amount and divide by 12 to get the monthly MIP amount).

FHA has given two main reasons for these increases.  The first is to reubuild the agency’s capital reserves, and the forecast is that these increases will add another $1.25B. in revenue per year.  The second is to encourage the return of private capital back into the residential mortgage market.  Put another way, FHA is trying to discourage the use of the FHA program and hoping more sources of alternative financing will arise.

To put these increases in perspective, on a $150,000 purchase, the .75% up-front increase will add about $1000 to borrower’s loan amount and increase the payment about $5 a month.  The .1% monthly increase will also add another $12 a month to the payment.  Thus, the combined effect of these changes is a $17 per month increase to the payment.  This equates to an increase of $11 per month on a $100,000 purchase and $23 per month on a $200,000 purchase.

These MIP increases are not wonderful news for FHA buyers but they have created an incentive for these buyers to get a house under contract and make sure their lender gets the FHA case # ordered by Mar 30th.

Read the entire FHA press release at: http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2012/HUDNo.12-037

March 6, 2012 by · 1 Comment

About James

James A. Williamson is currently the Sr VP of Sales Development for Shelter Lending Services (formerly Fairfield Mortgage). James joined Shelter in 1994 and was the company's top Loan Officer in GA for 20 straight years helping over 2500 families finance their homes. James now oversees an incredible group of Loan Officers in Atlanta while further building Shelter's Atlanta business.

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One Response to “FHA MIP Going Up Again”
  1. Securing an FHA loan is the most important piece of the home buying puzzle, but still there are a ton of variables that come into play that can affect the FHA. The best advice I can give to any homeowner is to do your research and take the time to find a well educated agent or Mortgage Advisor like James A. Williamson, securing a knowledgeable agent will help a lot, simply due to the fact that they’re time consuming and they’re able to assist more homeowners this way.

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