Monday, May 14, 2012

FHA New Rules

For certain FHA-backed homeowners, refinancing via the FHA Streamline Refinance program is about to get a lot less expensive.
Beginning June 11, 2012, the FHA implements a new policy for its mortgage insurance rates.

Millions Of FHA Homeowners Now Eligible

FHA mortgage rates have been steadily falling. Unfortunately, the FHA mortgage insurance rates have not. Today's FHA homeowners pay up to 1.50% in annual mortgage insurance premiums -- triple the rates that FHA-backed homeowners paid just 4 years ago.
For new FHA homeowners -- the ones using the FHA's low downpayment mortgage program, for example -- the FHA's rising mortgage insurance rates are a nuisance more than anything else. High insurance premiums are the price you pay for getting access to a mortgage with just 3.5% down.
But, for homeowners already with the FHA, rising mortgage insurance rates have made it exceedingly difficult to qualify for the FHA Streamline Refinance, the FHA's "no appraisal needed" refinance program. This is because the program rules state that a mortgage applicant's mortgage payment fall by at least 5% in order to qualify for the FHA Streamline Refinance.
"Mortgage payments" are defined as (1) monthly principal + interest payments, plus (2) monthly mortgage insurance payments.
Principal + interest payments have dropped significantly since 2008, but rising mortgage insurance rates have negated these effects. Making that 5% savings marker has become exceedingly difficult. Potentially millions of FHA-backed homeowners have been heretofore eliminated from the FHA Streamline Refinance program and from access to today's low rates.
For long-time FHA-backed homeowners, that's all changing.

"Grandfathered" FHA Mortgage Insurance Premiums

June 11, 2012, the FHA introduces a new mortgage insurance premium schedule for long-time, FHA-backed homeowners.
If your current FHA mortgage was endorsed by the FHA prior to June 1, 2009, you are eligible for the FHA's "grandfathered" mortgage insurance premiums. The new premiums are dramatically lower than the premiums paid by today's new FHA customers.
For eligible homeowners, the new FHA MIP schedule is as follows :
  • All loans : 0.01% upfront mortgage insurance premium
  • All loans (except 15-year fixed with LTV of 78% or less) : 0.55% annual mortgage insurance premium
  • 15-year fixed with LTV of 78% or less : No annual mortgage insurance premium
As a real-life example of how the new FHA mortgage insurance premiums work, a homeowner in Chicago, Illinois with a $400,000 mortgage from 2008 could refinance under the new FHA Streamline Refinance program, paying just $40 in upfront MIP and $183 per month in annual MIP.
This is a huge savings over the FHA's current MIP schedule which would require $7,000 to be paid in upfront MIP and $417 per month in annual MIP.
With the grandfathered FHA Streamline Refinance schedule, there are no other fees, no other adjustments, and the terms are available to all FHA-backed homeowners whose mortgages were endorsed prior to June 1, 2009.
Mortgages endorsed post-June 1, 2009 are subject to the current FHA mortgage insurance premium schedule.

Don't Wait Until June 11. Start Today.

The FHA's new mortgage insurance premiums go into effect June 11, 2012. However, you don't need to wait until June 11 to get your loan application started. You can start your loan application today, and lock your mortgage rate, too.
You'll be among the first in the country to use the FHA's new, lower MIP schedule. And you'll get today's great rates. Get started with a rate quote and see what lower MIP can do for you.