fha mip increase

Even with MIP Increases FHA Programs Still Offer Benefits

fha mip increaseRecently in mortgage news you may be hearing about rising mortgage insurance premiums (MIP) for FHA loans. However, this does not mean the programs offered by the Federal Housing Administration have lost all benefit. These government mortgage loans continue to help home buyers and homeowners with low FICO scores. They also offer lower down payments which helps first time home buyers get into their first home. There is a downside to the increasing MIP but we must not overlook what FHA loans still offer.

April 1, 2013 FHA MIP Increase

Mortgage insurance premiums for FHA loans can be as high as 1.60 percent as of April 1, 2013. However, this is the worst case scenario and only for jumbo loans over $625,000. For many homeowners, those with a 20, 25, or 30 year mortgage and 95.01% or higher loan-to-value (LTV), the annual premium will be 1.35 percent. Those with a lower LTV will receive 1.30 percent.

Increasing premiums 7 time in just the last 5 years the FHA is ensuring its survival. Also, by law the Federal Housing Administration is required to have a Mutual Mortgage Insurance fund with $2 for every $100 insured. This fund is used to pay for claims on FHA insured loans however recently they had a negative amount in their fund.

What FHA Loans Still Offer

Some home buyers just don’t have enough money to make a large down payment. With an FHA mortgage you have the opportunity of putting a lower down payment on your home. First time home buyers who are still building up their income and financial credibility still benefit tremendously from this. Although you would have to pay a high FHA MIP for the life of the loan you can use this program as a stepping stone to a conventional home loan.

Homeowners looking to refinance their FHA loan can take advantage of the FHA Streamline program. The ability to refinance without an appraisal saves homeowners a lot of money. An FHA refinance can also offer extremely low requirements. This is beneficial to homeowners who have taken a hit to their credit but need to refinance with a lower rate.

Future FHA Programs

Although the FHA has been helping homeowners for many decades, we may sometimes forget what their goal is. This department of the government was put into place to help homeowners and home buyers. As the needs of Americans change so will the future FHA programs. That is why we must pay a little more today into mortgage insurance premiums for a better tomorrow. Worst case scenario homeowners could just refinance into a conventional loan and save on MIP or join the military and receive VA benefits.

Published by

Fred Bohman

Fred Bohman has 8 years of experience in real estate and finance. Fred started in the mortgage industry in 2004 under a seasoned professional with over 20 years of experience. In 2006 after learning everything he could from his mentor Fred past the real estate license test and branched out on his own. Since then Fred has handled everything from residential mortgages to business financing. In 2008 Fred pasted the Series 62 securities licensing test which gave him a deeper understanding on how the mortgage bond market works and how interest rates move. In 2010 when the National Mortgage Licensing System and Registry was enacted Fred passed both national and state tests. Fred was born in in Sweden and moved to California with his family at the age of 13. He currently lives in Orange County, CA and studied Business Finance at the University of Fullerton California.

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