FHA to Cost Borrowers More
MIP Changes Will Cost Borrowers More
FHA currently allows borrowers to cancel the mortgage insurance premium (MIP) when their unpaid balance reaches 78% of the original purchase price. While no specific date has been set, sometime in 2013, new FHA loans will require the mortgage insurance for the life of the loan.
At existing rates, the monthly MIP on a $168,875 mortgage is $178.99 per month. Under the current rule with normal amortization, the MIP would no longer be required in 9 years and 9 months. However, under the new rule, it would last for the entire 30 year term.
MIP Rates to Rise
They also announced that the annual MIP will be increased from 1.25% to 1.35% at some point in the near future. HUD, the parent agency for FHA, is making the changes to restore capital reserves needed to fund failed loans.
People that can close a FHA loan before the change takes place will fall under the old rules for canceling MIP and the lower rates. Since no date was announced, it is not known exactly when the changes will take effect.