By Jennifer Klein and Derek Sandoval
FHA mortgage insurance premiums rose on April 1, 2013. Placer County Association of REALTORS® YPN members Jennifer Klein and Derek Sandoval discuss exactly what has changed as well as what these changes mean for real estate professionals and those applying for a loan.
Jennifer Klein is a REALTOR® in Northern California who is experienced in short sales, investments, and property management. Connect with Jen at RosevilleAndRocklin.com, JenKlein.com, and @JenKleinSac.
Derek Sandoval has worked for Keller Williams Realty in Roseville, Calif., since 2009, and specializes in residential, REO, and short sales. Find Derek at www.dereksellshomes.com and dereksellshomes.featuredblog.com.
My lender says permanent FHA PMI doesn’t start till June 2013. 0nly PMI rates went up April 1, 2012.
FHA to TAKE 22% OF YOUR EQUITY……June 3, 2013 : FHA MIP Changes Again
The Federal Housing Administration has made 6 changes to its mortgage insurance premiums in the last 6 years. Each has increased the short-term cost of using FHA-backed mortgages. The agency’s next change, however, will change its long-term costs.
Beginning June 3, 2013, the FHA will change its long-standing Annual MIP Cancellation Policy. Certain homeowners will lose their right to cancel the annual MIP. FHA MIP will be perpetual.
Here’s what’s changing.
Currently, the Federal Housing Administration requires homeowners to pay annual MIP so long as their loan-to-value is greater than 78%, where “value” is equal to the last known value of the home.
In addition, if the original mortgage term is greater than 15 years, at least 60 payments must have been made on the mortgage before FHA MIP can be automatically cancelled.
Beginning in June, though, the FHA moves away from an LTV-based system. The new cancellation policy will be as follows :
Loans beginning at 90% LTV or less will pay annual MIP for 11 years.
Loans beginning at 90% LTV or more will pay annual MIP for the complete loan term.
This means that home buyers using the Federal Housing Administration’s 3.5 percent downpayment program will pay annual mortgage insurance for the loan’s full 30 years, regardless of whether the home appreciates to the point of having 22 percent equity or more.
With the new FHA rules, MIP is forever.