On April 5, 2010 the first of several planned changes to the FHA Mortgage Program went into affect. HUD increased the Up-Front Mortgage Insurance Premium (UFMIP) to 2.25% from 1.75%. The UFMIP is part of the mortgage insurance charged by HUD to insure FHA mortgages. It is based upon the mortgage amount and it is rolled into the mortgage rather than being paid for by the borrower at closing. This will make the impact of the increase much more affordable to borrowers.
On a $200,000 FHA mortgage, the UFMIP increased from $3,500 to $4,500. Since the additional $1,000 of UFMIP will be rolled into the mortgage it will increase the monthly payment slightly - $5.68 per month.
The reason for the increase is that delinquencies and foreclosures on mortgages have increased significantly over the past several years. And, a greater percentage of mortgages are now FHA insured mortgaged. This has caused greater losses to the FHA program and the increase is intended to increase the reserves set aside to handle these situations.
FHA is still a great deal. Conventional mortgage carry higher monthly mortgage insurance rates and, with the Loan-Level Pricing Adjustments, only those borrowers with the highest credit scores and largest down payments can qualify for the best conventional mortgage rates.
FHA will be making more changes in the future. Go to “FHA to Tighten Lending Standards, Increase Fees” for more information.
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