October 3, 2011
Earlier in 2011 we reported a change to FHA Mortgage Insurance Premiums–according to FHA Mortgagee Letter 11-10, a scheduled increase in Annual Mortgage Insurance Premiums took effect for all FHA loan case numbers dated on or after April 18th 2011.
The change was an increase in the annual premium for FHA loan terms of:
–Greater than 15 years
–Equal to or less than 15 years
For FHA mortgage loans with greater than 15 year terms, the new MIP amount depends on the down payment. If the down payment is equal to or greater than 5%, the new Annual Premium is 110 basis points (bps).
If the down payment is less than 5%, the new Annual Premium is 115 basis points (bps).
FHA instructions for loans equal to or less than 15 year terms were confusing to some–according to a chart published in FHA Mortgagee Letter 11-10, the new MIP amount for all loans with case numbers on or after April 18, 2011 depends on the down payment. If the down payment is equal to or greater than 10%, the new Annual Premium is 25 basis points (bps). If the down payment is less than 10%, the new Annual Premium is 50 basis points (bps).
But for FHA loans with terms equal to or less than 15 years with an LTV of 89.99 or less, there is no mortgage insurance charged, in spite of what the chart on the original FHA mortgagee letter seemed to indicate. According to FHA rules, “Mortgages with terms 15 years and less and with loan to value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.”
The original chart published in FHA Mortgagee letter 11-10 seemed to contradict that policy, but FHA has since published guidance stating clearly that FHA mortgages issued with terms of 15 years or less with “LTV ratios of 89.99% and less” are not charged mortgage insurance. Those who viewed the chart on FHA mortgagee letter 11-10 should cross-reference it with FHA’s most current information.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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