As we all know FHA has become one of the top programs for home purchasers and has also become a key tool for some who need to refinance in 2010. Earlier this year we had an increase in the upfront mortgage insurance premium from 1.5% to 2.25%. This had a slight increase in cost to the borrower. The increase was part of the FHA Reform Act passed by Congress in order to beef up the capital reserves for HUD’s mortgage program that had been dwindling for several months.
Last week FHA Secretary David Stevens announced that Congress passed another increase to the MI factors to further support the capital reserves of the program. The upfront mortgage insurance premium will actually be reduced from 2.25% to 1%, but the monthly MI factor (that which has a great impact on a borrower’s payment) will be increased from .55% to .85%-.90%. This increase is set to take place in less than a month on September 7th.
The truth is that FHA actually has the ability to raise the upfront premium even more in the future, but for the time being are going to reduce it to 1% to help make the adjustment a little less painful. At this point, FHA case IDs pulled before September 7th will have the current rates. Anything there after will be subject to the coming change.
If you are thinking about buying you may want to look seriously in the month of August in order to have a contract in place before the change. If you have questions or want to start a loan application you can email me or call 503.798.9183.