Congress just passed H.R. 5981, giving FHA (Federal Housing Administration) the authority to adjust its annual mortgage insurance premium. All FHA loan borrowers pay a monthly insurance premium on top of their mortgage payment, as a way to insure these low down payment loans. Currently an FHA loan allows you to buy a house with 3.5% down.
A recent bulletin issued by David H. Stevens, Assistant Secretary for Housing/Federal Housing Commissioner, said that FHA would lower its upfront mortgage insurance premium from 2.25% down to 1% AND increase the annual premium from .55% by an additional .85-.90%.
So while the up front cost is low, this is a HUGE INCREASE in monthly payment and severely decreases a borrowers purchasing power. Getting your FHA casenumber prior to the September 7 deadline will assure you the current fee structure.
Here's a comparison based on a $500,000 loan amount.
* Upfront MI premium reduced from $11,250 to $5,000
* Monthly MI jumps from $229.17 to $604.17
* DHHL (Dept of Hawaiian Home Lands) programs remain the same.
Good job Federal Gov't. Way to hurt the little guys again.