The Federal Housing Administration (FHA) is wasting no time putting at least one of the Obama administration’s housing finance reforms into place. The agency announced last month that it is implementing a new premium structure for FHA-insured mortgage loans.
FHA is increasing its annual mortgage insurance premium (MIP) by a quarter of a percentage point on all 30- and 15-year loans. Currently the month premium is based on a rate of .90 but after April 18th that goes up to 1.15% for loans with a CLTV greater than 95%. The upfront MIP will remain unchanged at 1.0 percent, and the new structure applies to all new loans insured by FHA on or after April 18, 2011.
FHA Commissioner David Stevens says the annual payment adjustment will increase borrowers’ costs about $30 per month and will help to strengthen the agency’s depleted coffers.
“After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA’s capital reserves and help private capital return to the housing market,” Stevens said in a statement.
He continued, “This quarter point increase in the annual MIP is a responsible step towards meeting the congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.”
Currently a FHA loan with a base loan amount of $200,000.00 would carry a month mortgage insurance premium of $150.00 but after April 18th that will rise by $41.67 a month to $191.67.
Fortunately, the private mortgage insurance companies have been keeping pace and rolling out new product offerings consistently since last year. Conventional 97% financing is back and the down-payment can even be a gift! This is great news for the market overall and a relief to those looking to purchase properties that may not be eligible for FHA financing. However, this does not eliminate FHA as an option for low down payment financing. Conventional financing with MI does have much more stringent requirements for debt-to-income, credit scores and seller contributions.
We here at LoanSouth have many great PMI options to help give you the consumer a better variety of options rather than just FHA financing. These options include lender paid mortgage insurance, split premiums and financed mortgage insurance. My personal favorite is the financed premium because in nearly every scenario, the financed PMI option saves you the borrower significantly on a monthly basis compared to other loan and PMI options. LoanSouth has premium pricing with several MI companies which means we consistently price out better than our competitors who may not have the same PMI options.
To find out more about LoanSouth’s mortgage programs please contact Brandon Byrd at 404.915.8252 or by email at bbyrd@loansouth.com.
*Nothing in this publication constitutes a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient’s individual circumstances or otherwise constitutes a personal recommendation. It is published solely for information purposes; it does not constitute an advertisement and is not to be construed as a solicitation. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, except with respect to information concerning LoanSouth Mortgage, Inc nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in the report. The report should not be regarded by recipients as a substitute for the exercise of their own judgment.
Brandon Byrd, Mortgage BankerNMLSR License # 209657, A Georgia Residential Mortgage Licensee #23200
Questions? Contact: Bbyrd@loansouth.com, 404-915-8252
