FHA adjusts mortgage insurance again

Finally, some good news for FHA loan applicants.  Since January 2008 FHA steadily raised FHA Mortgage insurance premiums to help make up for steep losses incurred as a result of the housing bust.  Apparently the FHA mortgage insurance pool is back on healthier footing because as of yesterday FHA mortgage insurance premiums are actually declining!  HERE IS A LINK to the mortgagee letter announcing the reduction.  And here is a recent history of FHA Mortgage insurance premiums:

recent history FHA

Here is the chart showing updated FHA mortgage insurance premiums as of yesterday:

FHA chart1


FHA Loan Limits announced for 2014

In case you missed it HUD announced the 2014 county-by-county loan limits for 2014.  As you will see the maximum loan limits decreased for most all counties across the region.  HUD is continuing their efforts to reduce their participation on the “private” mortgage market.  Traditionally HUD increases the exposure of the marketplace to FHA loans in a counter-cyclical fashion.  When the housing market is having trouble they lower the barriers the entry and when the housing market is strong they make it less attractive.  We are currently in the latter phase.  Here are the county-by-county loan limits for Oregon & Washington: Oregon:2014FHAORWashington State:


FHA mortgage insurance changes coming

The FHA is extending their efforts yet again to make their loans comparatively more expensive to conventional financing and private mortgage insurance.  In their mortgagee letter released on January 31st (see HERE) they announced that for FHA mortgage applications registered after March 31st the monthly mortgage insurance premiums will increase.  It’s important to emphasize that these changes only impact new FHA mortgage originations and will not change the mortgage insurance requirements for existing FHA loans.  Here the chart featured in the release which shows the changes:

FHA MI April 1 2013

For a $250,000 purchase where a customer is putting the minimum 3.5% down payment this creates an additional monthly expense of about $20 per month.

The second change they announced in the letter concerns the duration for which FHA monthly mortgage insurance premiums have to be paid and doesn’t take effect until June 3, 2013.  Under the current rules 30-year fixed rate FHA borrowers who put less than 10% down are required to pay their monthly mortgage insurance for at least 5 years.  After 5 years they can have the monthly mortgage insurance payments eliminated once their loan balance reaches 78% of the original purchase price (or appraised value if original FHA loan was a refinance).  Under the new rules FHA borrowers will be required to pay monthly mortgage insurance for the entire term of the loan.

FHA MI duration

Collectively these changes will create added incentive  for homebuyers to seek non-FHA forms of lending such as conventional financing with lender paid mortgage insurance.  However, conventional loans have additional layers of underwriting requirements making them more difficult to obtain.  Borrowers who have to rely on FHA financing will likely want to look for ways to fast track their finances so they can replace their FHA loan with a conventional mortgage after a couple years.


What Are FHA Minimum Property Requirements?

Homes that are the subject of a FHA mortgage application must meet minimum property requirements as determined by the Department of Housing and Urban Development (“HUD”: the agency which oversees the FHA mortgage insurance program). 

I am often asked if specific repairs will be required by the lender when a FHA loan is in play. The guidelines are actually easily accessible, so I thought I would post them here. 

If you are a realtor, I would encourage you to read chapter 3 of HUD handbook 4150.2. This section covers the Valuation Analysis for Single Family One- to Four- Unit Dwellings (4150.2).

You should also familiarize yourself with chapter 2 of HUD handbook 4905.1. This section covers the Requirements for Existing Housing One to Four Family Units (4905.1).

Since underwriters don’t make visible inspections of homes, they rely on the appraiser to inspect the home and highlight any “lender required repairs”.

FHA to raise mortgage insurance premiums…again

The Federal Housing Administration announced that it would increase the mortgage insurance premiums for FHA mortgages beginning April 1st, 2012.  Here is the announcement copied from the FHA website:

…FHA announced a new premium structure for FHA-insured single family mortgages: as of this spring, the annual mortgage insurance premium (MIP) will increase by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount;  and upfront premiums (UFMIP) will increase by 0.75 percent…these changes would have a minimal effect on homeowners.

Currently, borrowers who opt for a FHA 30-year fixed rate putting the minimum 3.5% down payment finance an upfront mortgage insurance premium equal to 1% of their loan and then pay monthly mortgage insurance based on a 1.15% annualized premium.  Under the new structure the upfront mortgage insurance premium will increase to 1.75% (+.75%) and the annualized premium used to determine the monthly mortgage insurance payments will increase to 1.25% (+.10%).

How do these changes impact mortgage payments?  Here is a chart comparing the new and old structures based on a $200,000 purchase price, 3.5% down payment, for a 3.75% FHA fixed rate:

Congress restores FHA loan limits

Congress approved an appropriations bill that amongst other things restores the FHA loan limits that have been in place the past 2 years and extends them through 2013.  For the Portland-Metro area this means the maximum FHA loan amount goes back to $417,000.  If you’d like to check another location you can do so at THIS LINK.

FHA loan limits decrease as of October 1st, 2011

Sorry for the late post on this topic.  As of October 1st, 2011 FHA loan limits for most areas of the country have declined as a result of expiration of stimulus legislation.  Currently, the  FHA loan limit for a single family residence in the Tri-county area (Portland, OR) is $362,250.  This figure can adjust as of Janaury 1st, 2012 but barring any new legislation I wouldn’t expect it to.  You can use THIS LINK to check the FHA loan limits for other areas.

FHA mortgage insurance premiums on the rise…again

You may remember that HUD increased monthly mortgage insurance premiums on FHA loans last year in an effort to shore up finances for the FHA insurance poll.  Unfortunately, HUD is at it again.  Beginning with FHA case numbers assigned after April 17, 2011 monthly mortgage insurance premiums will be going up .25% for 30 year mortgages and .50% for 15 year mortgages.  HERE is a link to download the mortgagee letter in case you want to read the news directly from the source.

What does this mean for homebuyers?  It means monthly payments will rise.  On a hypothetical purchase of  a home for $215,000 the total monthly “PITI+MI” payment would increase from $1,509 to $1,552; an increase of $43 per month.

To avoid this change homebuyers would have to be in contract to buy a home a couple days before April 17th so that the lender could register the loan with HUD prior to the change.  The upfront mortgage insurance premium that gets financed into the loan amount would remain unchanged at 1.00%.

Mortgage Loan Limits: FHA & Conforming

In case you want to find a FHA or conforming loan limit for a specific area around the country you can use THIS HANDY WEBSITE from HUD.gov.

HUD announces increase to mortgage insurance for FHA loans

The Department of Housing and Urban Development released THIS STATEMENT last week announcing upcoming changes to the popular FHA loan program.  The changes will take effect September 7th October 4th and are designed to increase mortgage insurance revenue to help stabilize the FHA insurance pool which makes FHA loans possible.  Effectively, HUD is decreasing the upfront mortgage insurance premiums (currently 2.25%) by 125 basis points (1.00%) but increasing the monthly mortgage insurance by 35 basis points (from .50-.55% to .85%-.90%).  The change will increase monthly payments and decrease affordability.  Here is the impact per $100,000 in loan amount:

Current MI arrangement for >95% loan-to-value per $100,000

Loan Amount: $100,000

Upfront Mortgage Insurance Premium (2.25%): $2,250

Total Loan Amount: $102,250

Monthly Mortgage Insurance Premium (.55%): $45.83

Monthly Principal & Interest + Mortgage Insurance @ 4.50%: $563.92 (does not include property taxes or homeowner’s insurance)

New MI arrangement for >95% loan-to-value per $100,000 as of September 7 October 4th, 2010

Loan Amount: $100,000

Upfront Mortgage Insurance Premium (1.00%): $1,000

Total Loan Amount: $101,000

Monthly Mortgage Insurance Premium (.90%): $75.00

Monthly Principal & Interest + Mortgage Insurance @ 4.50%: $586.75 (an increase of 4.05%-does not include property taxes or homeowner’s insurance)

See the spreadsheet HERE.