HUD has announced that in an effort to bolster it’s capital reserves they are going to once again increase the mortgage insurance premiums on FHA loans. The change will go into effect once they issue a mortgagee letter and set a start date.
The impact would be about $17 per month increase in mortgage insurance to you if you bought a $200,000 house.
The bigger impact comes from the second half of the change. That is that for most borrowers the mortgage insurance will stay on the loan for the life of the FHA loan. Currently it falls off once you reach 78% LTV (of your sales price, or appraised value at time of refinancing). This won’t apply to all borrowers, but from the announcement HUD put out, unless you put down 10%, you will have the mortgage insurance for the life of your FHA mortgage once this change goes into effect.
Now is the time to refinance your existing loan if you have been thinking about it, or to get under contract so you can capture the existing policy before it changes.
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