FHA Guideline changes 3-11-13

Posted By Marshall Walker @ Mar 11th 2013 1:49pm In: Mortgage

In case you haven't heard, FHA has once again decided to change its guidelines in relation to upfront MIP (Mortgage Insurance Premium). This time they decided to add another kick in the tail by changing guidelines related to the LTV (Loan to Value) and how long a borrower would have to pay MIP.

Here are the basics of what FHA is doing:

  • increasing the annual MIP percentage;
  • revising the period for assessing the annual MIP;
  • removing the exemption from the annual MIP for loans with terms of 15 years or less and Loan to Value (LTV) ratios of less than or equal to 78 percent at origination; and
  • increasing the annual MIP on all forward mortgages except single family forward streamline refinance transactions that refinance existing FHA loans that were endorsed on or before May 31, 2009.

So, what does this mean in layman's terms?

FHA is increasing the annual MIP percentage on all new FHA case numbers assigned on or after April 1, 2013. This means if you wait until after April 1, 2013 to refinance or start an FHA loan, you will run into a higher monthly MIP than you would have if you acted now.

Also, starting June 3, 2013, FHA will be increasing the minimum time required to pay MIP, and removing the 78% loan to value exemption. Prior to this change, an FHA loan required a borrower to pay MIP until the loan to value was at 78%, or a minimum of 5 years.

After the June 3, 2013 change, the 78% exemption will be removed and a borrower will be required to pay MIP for a minimum of 11 years and up to the full term of the loan depending on the original loan to value.
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