HUD Raising FHA Mortgage Rates by 0.25% In King of Prussia, Plymouth Meeting, Blue Bell & National Markets
...well effectively at least.
Letter 11-10 with the subject line: Annual Mortgage Insurance Premium Changes and Guidance on Case Numbers.
Here is the stated Purpose: This Mortgagee Letter introduces a 25 basis point increase to the Annual FHA Mortgage Insurance Premiums for forward mortgage amortization terms. It also provides guidance on the validity period of case numbers and new requirements for requesting them.
Effective Dates: The increase in Annual FHA Mortgage Insurance Premiums for forward mortgage amortization terms is effective for case numbers assigned on or after April 18, 2011. The new procedures for requesting case numbers are effective on April 18, 2011. Automatic case number cancellation is effective for all case numbers not insured prior to April 18, 2011.
What does this announcement mean to the Home Buyer? Below is an example comparing today's FHA Mortgage loan structure versus the new version.
Let's assume you are buying a new home at a purchase price of $425,000. The FHA Minimum Down Payment is 3.5%. So the base loan amount is $410,125. The FHA one time financed premium remains the same at 1%.
Assume FHA 30 Year Fixed Rate of 4.75%
Current Monthly Mortgage Insurance Base loan amount of $414,226.25 x 0.90 = $3,728.04 or $310.67 per month
New Monthly Mortgage Insurance April 18th, 2011 Base loan amount of $414,226.25 x 1.15 = $4,763.60 or $396.97 per month
This is a difference of $86.30 per month. HUD is effectvely raising FHA Mortgage interest rates or cost of the loan by a quarter percent!
Given that monthly FHA Mortgage Insurance must remain on the mortgage loan 60 months or for 5 years, regardless of down payment, it is substantial. In our example above the additional cost over those five years equals $5,177.81!!!
If you are in the market to buy a new home utilizing an FHA Mortgage, the time to act is now. Identify a property and obtain your FHA Mortgage case number before April 17th, 2011. Case numbers on which no action has been taken for the previous six months will be automatically cancelled.
Note: This also affects FHA 203k loan. It does not affect Reverse Mortgages.
If you are in the King of Prussia, Plymouth Meeting, Blue Bell and surrounding markets, and have questions about FHA Mortgages and/or need assistance with FHA Mortgages, please do not hesitate to contact me at 425.771.2095.
Need a Pre-approval? My team and I are here to help! Click I Want To Be Pre-approved: There are no upfront fees or obligation
Senior Loan Consultant
Meridian Bank - NMLS #126036
920 Germantown Pike, Suite 102 | Plymouth Meeting, PA 19462 | t: 610.739.6563 | f: 610.351.7810 |www.joegonzalez.net
For help or questions contact:
Senior Loan Consultant - NMLS #126036
GMH Mortgage Services, LLC
625 W. Ridge Pike, Building C, Suite 100 | Conshohocken, PA 19428 | Direct: 610-355-8039 | Cell: 610-739-6563