FHA to Increase Monthly PMI Fees Starting April 1, 2013

FHA has elected to increase the monthly PMI for all new FHA loans assigned a case # on or after 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

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

john mahaffey May 20, 2013 at 06:09 PM
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?
Teresa Fontanilla May 28, 2013 at 04:41 PM
Hi Joe, I just want to make sure I understand the changes to PMI. I have a home loan under 200K -conventional loan and have more than 50%+ equity. If we refinance for 15 years fixed, we will not be impacted by PMI, correct?
Tom Barnes June 03, 2013 at 10:18 PM
For Georgia FHA loan changes, go to http://www.georgiamortgageonline.com
chris June 06, 2013 at 08:57 PM
Joe - I purchased a home in August 2012 in Glendale, CA and was under the impression you needed 20% down to avoid PMI. Is this correct? Are 80-10-10 loans a new concept or option?
Amie Garrand January 25, 2014 at 10:29 AM
Hi Joe, I know I'm a few months late for this comment. But I thought I ask my question anyway. Our FHA case # was pulled before June 3rd but we closed on June 10th. Are we locked into PMI for the life of the loan? And if so, could a husband/wife assume an FHA loan after gettting 20% equity in the house and not have to continue paying the PMI? Thank you.


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