« FHA Manufactured Home One Time Close Construction Permenant
FHA Bans Down Payment Assistance (Seller Funded) and raises Down Payment to 3.5% »

New FHA Risk Based Mortgage Insurance (MIP and UFMIP)

HUD Announced the much awaited changes to the FHA Mortgage Insurance Premiums (MIP) and Up-Front Mortgage Insurance Premiums (UFMIP) based on LTV and Credit Score.  With all the talk about FHA doing what it can to help home-buyers I find this to have strange timing.  This will definitely put a lot more cash into the FHA coffers, and although it is going to impact homeowners I don’t think it will be that drastic.

Below you will find a copy of the new risk based mortgage insurance premium chart.  You can see that LTV and now Credit Score are going to play a large factor, and FHA effectively sets a minimum credit score (over 90% LTV) as a part of this announcement.  This is FHA’s first real acknowledgement of credit score after years of a stance that FHA was NOT credit score driven.  Guess what.. now it is.   The FHA Risk Based Mortgage Insurance Premiums show that FHA feels Credit Score = Risk.

I also find it interesting that they go to great length to let lenders know that these higher rates are NOT a reason to approve riskier loans.  I guess they are afraid that people will think “Hey FHA is charging them extra for the low score, so I guess that means I don’t have to take it into account”.  Wrong, FHA wants the same risk profile of loans, they just want MORE MONEY.

If you are a home-buyer in the market for a new house and you have bad credit, it would be very beneficial to write a contract and make sure your lender pulls a case number BEFORE July 14th.  After that a $200,000 FHA mortgage will cost you an extra $1,500 added onto your loan amount and an extra $8 bucks a month forever.  This is a direct result of the new FHA Risk Based Mortgage Insurance Premiums

 If you have GOOD CREDIT you can actually save money by waiting until after July 14th.  So if you credit score is over 680 you would save $500 by having your lender wait until after July 14th to pull a case number.  You will actually get a lower up front mortgage insurance premium, but you still lose the $8 a month. 

FHA Single Family Mortgage InsuranceUpfront and Annual Mortgage Insurance Premiums (Loan Terms > 15 years)Effective as of July 14, 2008
All premiums are specified in basis points (0.01%) 
Decision Credit Score  (FICO)            
LTV  850-680  679-640  639-600  599-560  559-500  499-300 NON-TRADITIONAL
 ≤ 90.00  125/50   125/50  125/50  150/50  175/50  175/50  150/50
 90.01-95.00  125/50   125/50  150/50  175/50  200/50  n/a  175/50
 > 95  125/55   150/55  175/55  200/55  225a/55  n/a  200/55
  1. A first-time homebuyer, with HUD-approved counseling, will pay only 200 basis points for the upfront mortgage insurance premiums.

 

You can access the FHA Mortgage Letter about New Risk Based Mortgage Insurance Premiums here.

This entry was posted on Monday, June 16th, 2008 at 6:15 pm and is filed under FHA Loans. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Comments are closed.