Brandon's Mortgage News

FHA announced in January that they would be increasing the upfront MIP from 1.75% to 2.25%.  This change goes into effect on Monday, April 5th and will affect any new FHA case numbers ordered. 

This change was made in an effort to strengthen FHA's capital reserves, while enabling the agency to continue to fulfill it's mission to provide access to homeownership for underserved communities.

The increase in upfront MIP doesn't impact a borrwer's cash to close, because this upfront fee is typically financed into the loan.  Practically speaking, what does this mean for a borrower?  As an example, we'll use a $100,000 base loan amount at 5.25% for 30 years:

    Old MIP @ 1.75% = $1750     P&I Payment = $561.87
    New MIP @ 2.25% = $2250    P&I Payment = $564.63

The payment increase is only minimal ($2.76/mo in this example).  For a $200,000 base loan amount, the payment increase would only result in an increase of $5.53/mo. 

This is the first in a series of changes that are coming soon, including increasing the monthly MIP; update the combination of FICO scores and down payment requirements for new borrowers; and reducing seller concessions to three percent, down from six percent.

The changes that will affect borrowers the most will be any changes in the monthly MIP and the reduction of seller concessions.  Both of these changes could increase the borrower's monthly payments significantly and could also result in higher 'cash-to-close' requirements.

To read the original mortagee letter released from FHA in Janurary, click here:
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-02ml.pdf

Be sure to subscribe below to stay updated with news like this.  Forward this to your friends or anyone who might be interested in this information.

Brandon Snider
District Manager
Consumer First Mortgage, Inc.