There are some important changes to FHA Mortgage Insurance Premiums (MIP) that will be taking effect later this year. Here is a brief overview of the impact of these changes. Call us at 425-413-6428 or email us info@HappyHomeTeam.com with any questions!

  • Up front mortgage insurance will decrease to 1.0% for all amortization terms
  • Annual premiums will increase on amortization terms >15 years to:
    • .85% on LTV’s <95%
    • .90% on LTV’s >95%

Old MIP vs. New MIP illustration

Based upon a loan amount of $200,000 @ 4.5% rate @ 30-year @ 96.5% LTV:

 

(*The Borrower Pays $45 more per month which translates into a negative $7,500 in buying power.)

However, if home is sold at year 7:

 

[*FHA gets $2,102 MORE in MIP but principal balance is $2,175 less, so at year 7, it's basically a "wash". (the same calculation for 5 years, same deal.)]

Bottom line, FHA gets MORE, but the buyer builds up more equity.

As of right now, the MI is still deductible on income taxes (sunset on December 31, 2010).

Just a reminder, that the MI drops off after it reaches 78%, or approximately 10 years!