New Changes in FHA Loans

Just got news that the FHA mortgage is changing its up front fee!  Take a read direct from HUD.GOV…

Quick Overview…

FHA loans have reported high losses over the last few years, and this has brought up concerns that the FHA program may need a bailout in the future.

In a move to increase their financial standing, on Monday, HUD announced their anticipated increases in the premiums they charge borrowers. The cost of borrowing with FHA is going to go up.

FHA loans, by design, are more liberal in their underwriting guidelines than conventional loan products (in terms of credit, income ratios, required investment from the borrower, and maximum loan amount). HUD is not a lender. Rather, it is a federally-insured insurance company. They insure lenders against default on loans underwritten in compliance with their published guidelines. It is because of this insurance that lenders approve and close loans with more liberal guidelines.

As an insurance company, HUD charges two types of premiums on the FHA mortgages:

•           The UFMIP (Up Front Mortgage Insurance Premium) will be raised effective April 1, 2012 from its current 1% to 1.75%. One advantage to the UFMIP is the fact that it is typically built into the loan amount and does not require additional cash outlay at closing.

•           The MMIP (Monthly Mortgage Insurance Premium) will be raised from 1.15 to 1.25% of the loan amount annually, starting on April 1, 2012 .

On a loan amount of $300,000, we will see an increased monthly payment of $36.41.

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