If you are buying a home or refinancing using an FHA loan, your annual mortgage payment could increase substantially if you don’t act by October 4.

FHA announced changes to both the Up Front and Annual Mortgage Insurance Premiums charged on FHA loans: 

The Up Front Mortgage Insurance Premium (“UFMIP”) declines from 2.25% to 1.00%.

The Annual Mortgage Insurance Premium increases from .55% to .85% or .90%. (To be finalized.)

While the rate on one was lowered, an increase in the Annual Mortgage Insurance Premium will increase the total annual cost of the loan and may impact the ability for some borrowers to qualify for a loan.

  Old Calculation         New Calculation       
Sales Price $300,000 $300,000
Loan Amount $296,013 $292,395

Down Payment

 $10,500 $10,500
Monthly Principal/Interest $1,456.21 $1,438.41
Monthly Hazard Insurance $72.38 $72.38
Monthly Property Taxes $250 $250
Monthly Mortgage Insurance $131.67 $215.46
Total Payment $1,910.26 $1,976.25
Interest Rate 4.25% 4.25%
Estimated Monthly Income to Qualify $5,750 $5,990

For all loan amounts, the impact of the increase in the Mortgage Insurance Premium is equal to between a .375% to .500% increase in interest rate. The effect on monthly payments for a $300,000 loan can be seen in the table above.

It is important to understand that if you are in the market to purchase a home or refinance, you have until October 4 to identify a property and order a case number before these new rates take effect. If you have questions about how these new rules affect your ability to borrow, I would be happy to put you in touch with a loan officer who can help.

Call us today at 425-413-6428 or email info@HappyHomeTeam.com