FHA to Increase Monthly PMI Fees Starting April 1, 2013
FHA (Federal Housing Authority) has announced sweeping changes to the fees they will charge for monthly PMI (Private Mortgage Insurance)
in Mortgagee Letter 2013-04, dated January 31, 2013.
Historically, FHA loans have been geared towards helping potential homeowners who have not so good credit or a lower down payment the opportunity to obtain financing to purchase or refinance a home.
But in recent years FHA has felt thebneed to increase both the Up Front and monthly PMI premiums, which has seen an increase in a borrower’s loan amount and monthly mortgage payments.
In April, 2012, FHA increased the UFMIP ( Up Front Mortgage
Insurance Premium)from 1.10% to 1.75%.
What this meant was for every $100,000 borrowed, FHA charged a 1 time fee of $1,100 that increased to $1,750. FHA does not required the borrower to bring this fee to closing, but rather allows them to finance it as part of the loan. So the $100,000 loan with the old premium became a $101,100 loan. Under the revised UFMIP the $100,000 loan now becomes a $101,750 loan. FHA does give the borrower the option to pay this premium at closing and not roll it in to the mortgage.
NOW FHA is going to increase the monthly PMI associated with an FHA loan, as well as increase the duration of time the PMI stays on the loan.
Here are a few example for a FHA loan with less than 10% down.
MONTHLY CHANGES on loans assigned after April 1, 2013
FHA loans with 15 and 30 years fixed interest rate will see an increase of 1/10th of 1%, or $10 per $100,000 borrowed.
So a $100,000 loan with see an increasein monthly PMI from $125 a month to $135 a month.
TERM OF MONTHLY PMI on loans assigned after June 3, 2013
Previously on FHA loans with less than 10% down the FHA premium would go away after approximately 5 years as long as the borrower had at least 22% equity in the home.
Now a FHA loan assigned a case # on or after June 3, 2013 will have monthly PMI for the duration of the mortgage, no matter what the equity is on the home.
So how do these changes affect you? The new homeowner?
Although the changes are not earth shattering, they are an increase to a borrower’s monthly mortgage payment as well as the overall cost through the years to obtain an FHA loan.
If you are on the fence when it comes to refinancing your home with an FHA loan, I suggest you speak with a professional loan officer as soon as possible before the fees go in to effect.
If you are in the process of looking for a new home, note that an FHA case number can only be assigned when a borrowers has an accepted contract on a home. The case number goes with the address of the home, not the borrower, so any pre-approval you may have prior to the above referenced dates does not mean you fall under the old fees.
Other fees are changing as well to FHA mortgages with different down payments and loan terms.
A copy of the Mortgagee Letter can be viewed at my web site,
www.JoesMyMortgageGuy.com or at www.FHA.gov
Eric Berls
2:34 pm on Tuesday, February 5, 2013
Joe, thanks for highlighting this, its good to know. I am assuming a FHA loan closed before June 3, 2013 will be grandfathered in to being able to get its PMI removed without having to refinance?
Joe Dziewulski
12:09 pm on Wednesday, February 6, 2013
Correct Eric, Only loans assigned a case # on or after the june 3rd date will have monthly PMI for the duration of the loan if they put less than 10% on a purchase or have less than 10% equity on a refinance
Rich K
2:57 pm on Monday, March 18, 2013
After April 1 2013, does just the monthly PMI go up 1/10th of 1% or does the UFMIP go up as well?
Jeff
7:32 am on Monday, March 25, 2013
Joe, thanks for providing such valuable information . I'm working with my mortgage banker now on refinancing. She said my PMI monthly would increase from 221 to 540. Howevwr I can qualify for a 3.25% rate and bring my principal and interest down by $600+ Net savings would be 300+ a month. Original loan amount was 545K. Does this sound right?
Joe Dziewulski
12:40 pm on Monday, March 25, 2013
Hi Jeff,
Yes,,the information sounds correct. Despite the increased PMI, the overall savings due to the lower interest rate more than offsets that increased fee. Also on your new loan eventually the PMI will go away, allowing you to realize even more savings!
Bridget
7:01 am on Wednesday, March 27, 2013
So if you get a loan after June 3, 2013 and eventually grt up to more than 10% equity - can you refinance and get rid of the PMI?
Joe Dziewulski
9:43 am on Wednesday, March 27, 2013
Hi Bridget,
Actually PMI is required until you have 20% equity, not 10%. To answer your question: On FHA loans originated June 3, 2013 or later, PMI will stay on the loan regardless of equity, It will be a permanent fee. So if you’re looking to purchase or refinance a home using FHA financing, I suggest you do if before June 3, 2013 to avoid this becoming a permanent fee.
aurora a
7:20 pm on Monday, April 1, 2013
If I get a fha loan after June 1st can I later refinance into a conventional loan (once my credit score is higher)?
Joe Dziewulski
7:29 pm on Monday, April 1, 2013
Yes, if you qualify for a conventional loan you can always refinance away from the FHA loan.
If you are looking for a pre-approval please feel free to call me.
Ryan D
11:23 pm on Thursday, April 4, 2013
Thanks for this wonderful information. My fiancé and I are in contract to buy a home at $553K. We are putting exactly 10% down ($55,300), but my lender is telling me my PMI will still be on or around $500/month. Is this accurate? I thought maybe because its a super conforming loan above $417K perhaps? We are set to close on 4/23, we shouldn't have the permanent PMI charge then correct?
Joe Dziewulski
12:36 pm on Friday, April 5, 2013
Hi Ryan,
Of course not knowing your exact situation, tough to know exactly what loan you are going in to.
With 10% down, have you explored an 80/10/10 loan with 0 PMI?
In this case you do a first mortgage for 80% of the purchase orice, a 2nd mortgage for 10% of the purchase price and 10% down.
This will avoid PMI and should get you in to a better interest rate on the 1st,,assuming you qualify
Kevin A.
5:15 pm on Monday, April 8, 2013
Joe,
My fiance and I are currently in contract for a house through an FHA loan. The contract is stated to close on or before June 4th. Are we in the clear because we're already in contract or does the closing process need to complete before June 3rd to avoid this? What if it were to close exactly on the 3rd?
Victor
1:36 pm on Wednesday, April 10, 2013
Hi Joe, this was great information. I have a question, most of the discussions I read is about paying less than 20% down on a loan. I am in the process of buying a house but I was planning to pay 20% down.do I have to pay for pmi still. this is in Texas
Victor
1:47 pm on Wednesday, April 10, 2013
Hi Joe, I do not want to rash you but we are waiting for the broker response on the pmi anytime now. if you can let me know the response to my previous question asap I will greatly appreciated.
Joe Dziewulski
3:16 pm on Thursday, April 11, 2013
Victor,
With 20% down you should not have to pay PMI, regardless of what state you are purchasing a home in. Good luck with your buy! It's a great time to take advantage of this market!
Tracey
8:01 pm on Friday, April 12, 2013
My boyfriend and I entered into a p&s at the end of March but just put our FHA application in on 4/11. Will our PMI be at the old rate or the new one that just went into effect?
Joe Dziewulski
2:20 pm on Monday, April 15, 2013
Your PMI factor is based on the day the FHA Case # is assigned. It appears that your FHA case # was assigned after April 1st, meaning you will have the higher monthly PMI.
Will
8:49 pm on Friday, April 19, 2013
Joe, I had a case number before the April 1st cutoff. However if i didn't make the cut off would I be able to refinance in a few years to another loan after my home appraises and shows that I have 20% equity in it and avoid paying PMI for the 11 years. Additionally do i have to refinance to get rid of the PMI at 20% on my current loan or do I just have to get it appraised.
Joe Dziewulski
1:34 pm on Sunday, May 5, 2013
All case #'s assigned after June 3rd will have PMI for the duration of the loan, even if you have 20% equity
Nicole Odom
1:15 pm on Sunday, May 5, 2013
Hi Joe! I am based out of Michigan and my husband and I were actually considering moving to the Schaumburg area because he was recently accepted to Loyola's Medical School. We were beginning to look at homes out that way until just this week he was offered a substantial scholarship to Oakland University (here in Michigan), so plans have changed again and we are now staying.
We currently rent a home in Royal Oak, MI and have been preapproved about two months ago and are going to start looking tomorrow again. We found a home for sale by owner in Oak Park, MI. Do you think it's feasible to close on the home by June 3rd? Thank you!
Joe Dziewulski
1:36 pm on Sunday, May 5, 2013
I think if you have all your paperwork in line and get your loan officer whatever they may request in a timely manner, a June 3rd closing is obtainable.
Of course there can alway be unforeseen circumstances that can delay any closing.
Ken Meisch
3:25 pm on Monday, May 6, 2013
Hey Joe,
I understand the upfront percentage increase regarding closing costs for the PMI is going up, but is the change on the monthly PMI also going to 1.75% as well? Just trying to determine how much someone can expect the monthly PMI price to be on a new home with the new terms. Is there a calculator for those numbers, or is it just the 1.75% of the balance divided by 12?
john mahaffey
1:09 pm on Monday, May 20, 2013
Joe we just bought a foreclosure home with an FHA loan. The as is appraisal was 135000 bit after improvements is 183000. With a loan of 142000 can we get rid of pmi as 142000 x 1.25 comes to 177500?