HIDDEN FEES TO BE AWARE OF WHEN PURCHASING A HOMEPurchasing a home is arguably one of the biggest financial decisions you will make in your lifetime. As you start your hunt, don't forget there will
FHA to increase cost and extend insurance term
Dated: February 12 2013
Get the pens out and write the contracts as The Federal Housing Administration (FHA) has increased the cost and the duration of the mortgage insurance premium (MIP) and the upfront fees. Anything with an FHA loan number after April 1, 2013 will be effected with the higher upfront funding fee charged for funding an FHA loan. Mortgage insurance traditionally stopped after the loan to value ratio fell to 78% or less but after June 3, 2013 the period for charging the mortgage insurance premium will be changed as well as the previously exempt 15 year mortgages with loan value ratios of less than 78% will no longer have the exemption. Please see the charts below to simplify the some of the changes in the MIP to expect.
The section of this ML that increases the annual MIP is effective for case numbers assigned on or after April 1, 2013, except as noted below.
The following sections of this ML are effective for all mortgages with FHA case numbers assigned on or after June 3, 2013:
revision to the period for assessing the annual MIP;
removal of the exemption from the annual MIP for loans with terms of 15
years or less and LTVs of less than or equal to 78 percent at origination;
increase in the annual MIP for mortgages with terms less than or equal to
15 years and LTV ratios less than or equal to 78 percent at origination.
For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute. See 12 U.S.C. § 1709(c)(2)(B).
For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.
For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.
Note: FHA calculates LTV as a percentage by dividing the loan amount (prior to the financing of any UFMIP) by the lesser of the purchase price (if applicable) or the appraised value of the home. For streamline refinances without appraisals, FHA uses the original appraised value of the property to calculate the LTV.
So for your clients that are currently on the fence about buying a home using FHA financing they need to sign up for their loans as quickly as possible as this will affect their upfront fees and their monthly payment.
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