FHA Mortgage Insurance Changes Coming in July

By
Mortgage and Lending with Ascent Home Loans

A new change is coming for FHA in July....Read on......

This new change from FHA comes from a study that they did that showed them that of the home loans generated in 2007, borrowers who earned less income(family median of 48,756.00), had a score of 680 or higher. While borrowers who had a higher income(famiy median of 53,338.00), had scores of 500-559.

The next change will be based on those results. FHA mortgage insurance will now adopt the risk based pricing model.

Currently, FHA charges an upfront mortgage premium of 1.5% and .50% on all loans regardless of fico score.

Below are examples of how the new pricing will impact the 30 year fixed mortgage:

                                                                                                                                                    

Borrower 1:

Fico of 559 and a LTV of 97% will have to pay  2.25% on the upfront mortgage premium and .55% on the monthy premium.

Borrower 2:

Fico of 590 and LTV of 97% will have to pay 2.00% on the upfront mortgage premium and .55% on the monthly premium

Borrower 3:

Fico of 660 and a LTV of 97% will have to pay 1.50% on the upfront mortgage premium and .55% on the monthly premium.

Borrower 1a:

Fico of 559 and a LTV of 90% will have to pay 1.75% on the upfront mortgage premium and .50% on the monthly premium.

Borrower 2a:

Fico of 590 and a LTV of 90% will have to pay 1.5% on the upfront mortgage insurance premium and .50% on the monthly premium.

Borrower 3a:

Fico of 660 and a LTV of 90% will have to pay 1.25% on the upfront mortgage insurance premium and .50% on the monthly premium

Borrower 4:

Fico of 680 and a LTV of 95% will have to pay 1.25% on the upfront mortgage insurance premium and .50% on the monthly premium.

 

Cost approach comparison between Borrower 1 and 3

Borrower 1(fico=559):

On a 200,000.00 30 year fixed mortgage at 6.375% the upfront mortgage insurance premium will 4,500.00(added to the loan balance for a total loan amount of 204,500.00).

The monthly payments will be: 1275.81 P&I plus 91.19 MI. Total= 1367.00

Borrower 3(fico 660):

Same 200K mortgage at 5.875%(lower rate due to risk based pricing), the upfront mortgage insurance premium will be 3,000.00 for a total of loan amount of 203,000.00.

The monthly payments will be 1200.82 P&I plus 91.14 MI. Total= 1291.96

Under this new plan Borrower 3 will pay an extra 6,060.00 if they are in the home for 5 years. This is broken up in to two parts: 1- the 1.5K extra in upfront mortgage premium. 2- 4,560.00 due to risk based rate pricing introduced earlier this year resulting in a higher interest rate.

The new FHA plan rewards better credit scores and lower Loan to Values, but still gives a helping hand to those who have become fico score challenged without the high rates and costs associated with sub-prime.

There are many different mortgage scenerios not shown here, including higher fico scores and 15 year loan terms.

Visit CarolinaMortgageShop.com for more information.

 

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Rainmaker
131,636
Bill Exeter
Exeter 1031 Exchange Services, LLC - San Diego, CA
1031 Tax-Deferred Exchange Expert

Hi Bryan,

Great information.  Thank you for sharing.  It's too bad they can't develop a risked weighted pricing schedule for ethical considerations, too.  The current market cycle shows people just walking away from their home with no care about their reputation, credit score, ethics, etc.

May 18, 2008 01:02 PM #1
Anonymous
Anonymous
Rob

 

Hi Bryan,

I bought a house in May 2008 with a FHA-insured 30 years fixed loan and paid upfront 1.5% MIP. If I streanline refinance with another FHA loan at a lower interest rate, do you know what will happen to the 1.5% MIP I paid before? Also, this time do I pay 1.25% MIP if I refinace in July?  I do have a FICO above 660 and a LTV of 90%.

Jun 09, 2008 09:53 AM #2
Rainer
9,211
Bryan King
Ascent Home Loans - Simpsonville, SC

When you do a streamline refinance with FHA, you will get a partial refund on the upfont portion of the MIP(in this case a very good one since it is so close to the original FHA loan date).

Your new loan would then be subject to the MIP rules that should be in force on July 14th, which with a 90% or lower LTV and a credit sore above 660 will give you that  1.25/.50 MIP fee.

Please feel free to contactme with any conventional or FHA  mortgage questions.

Best Regards,

Bryan King

 

 

Jun 10, 2008 09:30 AM #3
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Bryan King

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