New FHA Mortgage Insurance Premium

FHA Raising Mortgage Insurance MIP Again... FHA is releasing new FHA mortgage insurance premiums starting in April 9, 2012 and its not looking pretty. Both the up-front and annual / monthly mortgage insurance will increase significantly. This is the 5th increase in as many years for the monthly mortgage insurance going from .5% in 2008 to now 1.25% in 2012! 5% Conventional and USDA Loans are looking more and more attractive with these changes.

New FHA Up Front Mortgage Insurance

There are two types of mortgage insurance the first is the up front mortgage insurance premium which is financed into the loan. This is going from 1% to 1.75%. This does not affect your down payment of 3.5% because it can be financed into the loan amount. Example (Prior to April 9, 2012) $300,000 loan up front MIP or UFMIP $3,000 (After April 9, 2012) $300,000 loan up front MIP or UFMIP is going up to $5,250 an increase of $2,250.

New FHA Monthly Mortgage Insurance

The second type of mortgage insurance is the annual mortgage insurance which is paid monthly. It is going from 1.15% to 1.25% for loans using the minimum 3.5% down payment. The annual premium is paid monthly as part of your mortgage payment PITIMI. Example (Prior to April 9, 2012) $300,000 loan annual premium is 1.15% - $3,450 split up into 12 payments of $287.50 per month. (After April 9, 2012) $300,000 loan annual premium is 1.25% - $3,750 split up into 12 payments of 312.50 per month.

Other Options

These increases are making 5% conventional look much more favorable especially for those with high credit scores. I was looking at a quote for a buyer with a 722 credit score and 5% to put down. Her monthly MI was only .62% compared to FHA's new 1.25% and there was no up front MIP. Of course USDA offers a much better option to those who qualify with only .3% monthly and 2% up front. To see the comparison check out my article on FHA vs USDA.