FHA mortgage insurance costs are going up…again. It is almost like watching the price of stamps constantly creep up. However, postage prices creep up due to inflation, whereas FHA mortgage insurance cost goes up due to waste, inefficiency and massive losses at FHA. Here is a breakdown of the increases:
On loans up to $625,000, the FHA MIP (Mortgage Insurance Premium) is going up to 1.75% from 1%. This is a one time fee that is financed into the loan amount. So if you are going to borrow $300,000, the FHA MIP used to be $3,000 resulting in a $303,000 loan amount. Now it will be $5,250 resulting in a loan of $305,250. That extra $2,250 will increase the monthly payment roughly $10/month at today’s interest rates. So not only is it an increase of $2,250, its also an increase of $10/month, in this example.
FHA also has a monthly mortgage insurance (MI) cost, and the monthly cost will be 1.25% up from 1.15%, so on the above $300,000 example, the monthly MI will increase from $287/month to $312/month.
On loans over $625,000 up to the limit of $729,750 the monthly MI is going up .35% from it’s current 1.15% of the loan amount to 1.50%. So if you borrow $700,000 on an FHA loan the monthly MI will increase from $670/month to $875/month!
These changes begin April 1st, 2012. All I can say is…wow. What is next at FHA?