Articles Tagged With: Mortgage Insurance

June 13, 2017

What Is Mortgage Insurance And How Does It Work?

“What is mortgage insurance?” is a common question for those new to the home loan process. Do you understand how it works? It helps to define the two things referred to by industry professionals as mortgage insurance. There is mortgage insurance which the borrower pays for as a requirement of the FHA loan, then there is the “mortgage insurance” referred to in FHA loan rules which is something else entirely. Note: What we are discussing here is not hazard insurance, which may be a requirement on some, but not all FHA loans. FHA Mortgage Insurance For The Lender The FHA single family home loan handbook, HUD 4000.1, refers to “mortgage insurance” when discussing the FHA’s role in insuring the loan to reduce the risk for the participating lender. On page | more...

FHA Loans And Natural Disasters: What You Should Know

February 10, 2017

FHA UFMIP Refunds: A Reader Question

By Joe Wallace

Is the FHA Up Front Mortgage Insurance Premium or UFMIP refundable? A reader got in touch with us in the comments section this week to ask us a question in that area: “Is there any return of the UFMIP when refinancing out of an FHA loan to conventional? If so, what is the proration amount or percentage of fees refunded? over 6 months, 12 months, 18 months, 24 months?” This insurance premium on FHA mortgages is refundable under a specific set of refinance loan circumstances, but not for all loans. FHA loan rules in HUD 4000.1 address the issue directly; on page 156 we learn the following: “The UFMIP is not refundable, except in connection with the refinancing to a new FHA-insured Mortgage.” HUD 4000.1 states that Up Front Mortgage | more...

January 11, 2017

FHA MIP Rates For 2017: Revised

By Joe Wallace

The FHA/HUD official site has announced changes to the FHA MIP fee structure for 2017. According to the latest FHA mortgagee letter, “FHA continuously strives to achieve the appropriate balance between meeting the housing needs of the borrowers that FHA’s mortgage insurance programs were created to serve, and also the requirement of minimizing the level of risk to the Mutual Mortgage Insurance Fund undertaken relative to the insurance of those mortgages.” “FHA has determined that the appropriate balance of its statutory operational goals now requires a reduction of the rate of annual MIP charged pursuant to Section 203(c)(2)(B) of the National Housing Act (NHA). As provided in this ML, the total annual MIP charged pursuant to NHA sections 203(c)(2)(B) and (C) for most Title II Single Family forward mortgages has | more...

December 14, 2016

Mortgage Insurance Premiums, Down Payments, And FHA Loans

By Joe Wallace

Some borrowers get confused about the FHA’s required mortgage insurance premium (MIP), the Up Front Mortgage Insurance Premium (UFMIP) required to be paid at closing or to be financed into the loan, and private mortgage insurance (PMI). The FHA loan rulebook says of UFMIP, “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” UFMIP is considered a standard cost of an FHA mortgage loan and is a separate expense entirely from the down payment, also known as the minimum required investment. FHA loan rules, as stated above, do permit the financing of the UFMIP, but the amount must either be financed entirely into the loan or paid | more...

October 7, 2016

Natural Disasters and FHA Mortgages

By Joe Wallace

Natural disasters are a serious issue for home owners, whether they have just closed, paid off their mortgages, or are somewhere in between. When a hurricane strikes, when flood waters rise, or when other acts of nature threaten, damage or destroy homes, many aren’t sure where to turn or what to do first. FHA mortgage loan options in these cases depend on a variety of factors, but there is help available to rebuild and recover. FHA mortgage options include 203(k) and 203(h) loans (including refinance loans) that can help home owners recover, but what do to in the meantime? The first thing a home owner should do is contact FEMA to see what assistance may be available on a federal level. For the most recent (at the time of this | more...

September 22, 2016

FHA UFMIP: A Reader Question

By Joe Wallace

A reader asks, “I want to purchase at home for 141,000 and I am paying the 3.5 down payment which totals it 136,065. How much will I pay in Up Front mortgage and annually MIP. If I pay the UFMIP in closing will it still be added into to total amount loan?” Let’s begin with a few basics. UFMIP stands for Up Front Mortgage Insurance Premium, which is required as one of the closing costs of an FHA mortgage loan. According to HUD 4000.1, “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” That last sentence means that your loan limit is unaffected by the amount of | more...

June 2, 2016

FHA 203h Loans For Disaster Victims

By Joe Wallace

Did you know the FHA offers a type of home loan specifically for those recovering from a disaster? The FHA 203h loan is described in HUD 4000.1 (the FHA loan rulebook for Single Family Mortgage loans and refinance loans) as follows: “Section 203(h) of the National Housing Act authorizes FHA to insure Mortgages to victims of a Presidentially-Declared Major Disaster Area (PDMDA) for the purchase or reconstruction of a Single Family Property. Mortgages to be insured under Section 203(h) must be processed and underwritten in accordance with the regulations and requirements applicable to the 203(b) program.” Borrowers must have a minimum FICO score of 500 to qualify under FHA loan guidelines, and lender standards may also apply. The FHA 203h loan rules include the following for eligibility. “The previous residence | more...

July 28, 2015

FHA and HUD Recognize A Year Of Opportunity

By Joe Wallace

The FHA and HUD are reminding borrowers about an important change made to the FHA single family home loan program in conjunction with a new HUD press release titled, “A Year of Progress: Delivering on the Promise of Opportunity”. The Department of Housing and Urban Development is approaching its fifth decade of service. The press release states, “As HUD approaches its 50th anniversary, Secretary Castro is laser focused on advancing policies that provide folks with access to quality housing, good schools, transportation and economic opportunity. We recognize housing as a platform for Americans who are striving to improve their lives and break the cycle of poverty for the next generation. As needs for our services have increased, HUD will continue to invest in initiatives that have demonstrated outcomes in helping | more...

November 12, 2014

FHA PMI Rules: A Reader Question

By Joe Wallace

A reader asks, “Does the PMI not apply to down payments of 20% and above?” The FHA has changed the rules for PMI–Private Mortgage Insurance–and as a result all FHA home loans known as “forward mortgages” with case numbers assigned on or after June 3 2013 now have different requirements than previously approved FHA mortgages. FHA Mortgagee Letter 2013-04 rescinded a set of FHA PMI rules and enacted new ones in their place. The rescinded rules include the following changes as described in FHA Mortgagee letter 2013-04; “…rescinds the automatic cancellation of the annual MIP collection announced in MLs 2000-38 and 2000-46; ….rescinds ML 2011-35, under which mortgages with terms of 15 years or less and LTVs of less than or equal to 78 percent at time of origination were exempt from the | more...

What you should know about FHA 203(h) Loans For Disaster Victims

September 30, 2014

FHA Mortgage Insurance: A Reader Question

By Joe Wallace

A reader asks, “Mortgage companies have kept sending letters/emails, saying ‘You no longer pay MIP because FHA MIP policy has been changed since May 2014. You have paid unnecessary MIP payments because since you has refinanced for your home 2012.'” “I refinanced my home mortgage through FHA in Mar.2012 and since then I have paid MIP until principal reach less than 78%. It will be by 2019 according to my mortgage company. Can you clarify ‘Revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP’? Dose cancellation of MIP mean ” home buyers who apply finance through FHA do not need to pay MIP? Should I stay with my current mortgage or refinance?” This reader question refers to | more...