Effective for FHA loans for which the case number is assigned on or after October 4, 2010 the Upfront Mortgage Insurance will decrease from 2.25 to 1.00 (100 basis points) on all FHA insured loans except Home Equity Conversion (HECM - "reverse mortgage"). Chances are you have heard this or some version of it but until yesterday, September 1, 2010, it was not in writing in the official form from HUD.
When are FHA case numbers assigned?
Case numbers must be assigned prior to ordering third party services such as the appraisal. Appraisals are not ordered until there is a fully executed sales agreement in the lender's possession. The lender orders the FHA case number and assigns it to the loan application where it becomes permanent record.
Monthly Mortgage Insurance also changing.
With UFMIP going down MMIP is heading up. Much more dangerous to the industry because it impacts monthly payment and thus debt-to-income ration (DTI). Currently on loans of over 95% the MIP is .55% annually and from 95% and lower it is .50% annually. Effective October 4, 2010 those numbers will be .85% and .90% which results in an increased monthly payment.
Contrary to some reports there has been no notification of change in the amount of closing contributions by the seller which can be contributed to cover closing costs which is 6% and has not (yet) changed. The buyer must contribute 3.5% of their own money but it can be a gift.
This information applies to 203b and 203k loans.
Examples - top row is now, second row is after 10/4 and the $43.39 is the monthly payment increase:
| Sales Price | Down | Loan Amt | UFMIP | Total Loan | P&I Pmt | MIP | P&I&MIP |
| 200,000 | 7,000 | 193,000 | 4,342.50 | 197,342.50 | 1,054.98 | 88.46 | 1,143.44 |
| 200,000 | 7,000 | 193,000 | 1,930.00 | 194,930.00 | 1,042.08 | 144.75 | 1,186.83 |
| 43.39 |
Questions? Don't hesitate, ever, to contact me.
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NOTICE: I have been writing in this blog since July 2006. Some of the older articles may contain information that has changed. Please check the date and phone me if you have any questions.
Here is my Golden Comment...
Giveth with one hand and take away with the other...
Ken - Excellent information on the FHA changes. Thank you for sharing a very good blog.
I have a client whom I told this too. He is using Chase and was told by Chase that Chase is already implementing this, before the October 4th date.
LaNita - Chase cannot override the FHA rule so I imagine what they were trying to tell him is if he does not get an FHA casefile ID number assigned (get an offer accepted) prior to 10/4 he will be subjected to the new FHA rule. We're letting applicants know this can affect them if they do not have their fully executed purchase agreement to us prior to 10/4.
lol@ Lane! Thanks Ken and I agree with your rationalization about Chase!
Thank you for the details. I've been hearing about this for a few weeks, but seeing it makes about $40 per month difference is good. Some buyers will balk at that, even though they happily pay $100 per month for television.
As Ken mentioned, the big problem will be for those folks whose DTI ratios are close, because we have to count that MI payment in the calculation. Thus it effectively drops the value folks will qualify for in their loan.
"Here is my Golden Comment...
Giveth with one hand and take away with the other..."
I feel the same way Lane! Thanks for the quick & easy review Ken
We should all be busy Monday morning requalifying our borrowers. I have been trying to prepare all my Realtors for what the net results will be.
Thanks Ken for explaining it in a clear concise way. I'm glad we have you to help us keep up with the FHA changes.
Excellent information on the FHA changes. Thank you for sharing a very good blog.