If you have buyers who are planning to apply for an FHA loan, they’d better act fast, because changes are coming that will make all FHA mortgages more expensive.
There are three main areas that are changing and two different effective dates.
April Change – Higher Annual MIP
The MIP is an annual mortgage insurance premium similar to private mortgage insurance. It’s included in the monthly payment. As part of FHA’s attempt to shore up its capital reserves and begin pulling back from its active role as a nation’s dominant mortgage provider, beginning with April 2013 case numbers, the Annual MIP will increase by 5 to 10 basis points, depending on the loan term and loan-to-value. (FHA Streamline Refinances of original FHA mortgages issued before June 1, 2009 are exempt from this pricing change.)
What should you do? If you have buyers who would like an FHA mortgage, follow up and encourage them to apply for an FHA loan before April 1 to avoid the Annual MIP premium increase, which may affect the amount of house they can afford. Case numbers must be assigned prior to April 1st.
June Changes – Annual MIP required on ALL loans & for longer durations
In the past, FHA rewarded borrowers who chose shorter-term, lower LTV loans by waiving the Annual MIP. That special treatment is gone. Beginning with June 2013 case numbers every type of FHA loan will require Annual MIP.
- Annual MIP on all mortgages, regardless of how long or short the term, or LTV
Annual MIP will take longer to drop of, if it does. For case numbers prior to 06/03/13 and loan terms greater than 15 years, the MIP is paid for a minimum of five years. All loan terms will be subject to the following:
- LTV of 90% or less– MIP required for 11 years
- LTV of 90% or greater– MIP required for entire loan term
Most FHA borrowers have less than 10% down, resulting in a higher LTV loan and a longer duration for MIP.
What should you do? Get the word out! There’s still time to obtain a case number before these changes go into effect! Reach out to your current and past customers and let them know this is coming.
Courtesy of the Shelter Mortgage bl0g.