Orlando Mortgage Blog

As mentioned late in August, the new FHA Mortgage Insurance Premium (MIP) changes took effect yesterday. For those that are not familiar with the FHA program as it relates to MIP it serves a similar purpose as Private Mortgage Insurance (PMI) on a conventional loan. 

• On a 30 year loan the cost of the Up Front Mortgage Insurance Premium (UFMIP) is now 1% of the loan amount that may be added on top the loan and the annual premium paid on a monthly basis will now be 85 BPS for loans = or < 95 percent financing and 90 BPS for loans > 95 percent financing.
• On a 15 year loan the UFMIP is also now 1% of the loan amount that may be added on top the loan and the annual premium paid on a monthly basis will remain unchanged at "None" for loans = or < 90 percent financing and 25 BPS for loans > 90 percent financing. 

So the cost for the 30 year term borrower is slightly higher after the change on a monthly basis. But the up front MIP went down from 2.75% to the new 1% level and still can be added on top. Half full or empty, it still comes down to a few basic benefits making the most used FHA 203b program a product of choice for many:

• Buyers wanting 30 year financing with a low down payment of only 3.5%.
• FHA allows Cash Out to 85% and conventional loans only 80% or less.
• FHA allows Refinance Loans to 97.75% financing of the statutory loan limit and then financing the UFMIP on top. Florida conventional loans are generally capped at 90% today with exception.
• FHA Rate/Term Refinance Loans allow payoff of an existing second mortgage or HELOC that was not used for purchasing the home if that second is at least 12 months old and if the total draws in the last 12 months have not exceeded $1,000.
• If your current home loan is an FHA mortgage you can also apply for an FHA Streamline loan that doesn't verify current income just uses the stated number and may or may not require a new appraisal. No cash out greater than $250 is allowed on this option. The appraisal item can save your loan.
• NOTE: If you are using 15 year financing on your home purchase the FHA product will often be a better deal than what the Conventional pricing and PMI combination would be...and also a way to do some loans that don't fit Conventional PMI requirements of a 720 credit score and max% DTI.

You are only allowed one FHA home loan at any time.