FHA Mortgage Insurance Premiums Requirements
“I am purchasing a home using a FHA loan. Why is it necessary to pay for FHA insurance for the length of the loan? It is a 30 year fixed mortgage?”
It’s impossible to speculate about the reasons for changing the FHA MIP requirement for 30 year mortgages, but let’s examine the recent changes to FHA loan policy on MIP in general.
In FHA Mortgagee Letter 2013-04, FHA loan policy for mortgage insurance premiums changed, as stated above, to the maximum allowed by law. That means the FHA now requires MIP payments for a longer duration than loans with case numbers issued prior to June 3 2013. According to the FHA official site:
“For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.”
The FHA mortgagee letter also states that for any FHA mortgage principal with a loan-to-value greater than 90%, “FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.” That 90% LTV calculation omits the amount of any financed Up Front Mortgage Insurance Premium.
How is LTV figured for purposes of the new MIP rules? According to the FHA official site, “FHA calculates LTV as a percentage by dividing the loan amount (prior to the financing of any UFMIP) by the lesser of the purchase price (if applicable) or the appraised value of the home. For streamline refinances without appraisals, FHA uses the original appraised value of the property to calculate the LTV.”
The new MIP rules include increased MIP premiums for all FHA forward mortgages as previously announced, “except single family forward streamline refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009; the rate for those streamline transactions remains at the level announced in ML 2012-4.”
If you have questions about the FHA mortgage insurance payment requirement, including whether or not your current FHA loan might be affected, call the FHA directly at 1-800 CALL FHA.
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