FHA Mortgage Insurance Premiums to Change October 4, 2010 - How this affect your Dana Point Real Estate purchase

FHA announced recently that it will be changing the upfront (UFMIP) and monthly FHA mortgage insurance premiums effective with case numbers assigned on or after September 7, 2010, but the date has been pushed back to October 4, 2010.

Essentially, FHA will lower the upfront mortgage insurance premium to 1.25% of the purchase price and raise the monthly FHA mortgage insurance premium from 0.55% (95% LTV and above) to between 1.40% and 1.45%. This will drive up the monthly payment of an average buyer significantly!

So how does this affect your interest in dana point real estate or south county areas? Here are some things you need to know about these changes if you are, for example, buying a San Clemente home:

• The MI premium changes apply to purchases, regular refinances and streamline refinances only (reverse mortgages have different MI premium changes).
• The current Up Front MI premium is 2.25% of the loan amount and the new Up Front MI premium will be 1.0% of the loan amount for all standard FHA programs.
• The current monthly MI premium is .55% and the new monthly MI premium will be .90% if the Loan-to-Value is GREATER than 95% on 30 year loans. Since most buyers put only the minimum 3.5% down this applies to most loans.
• The current monthly MI premium is now .50% for Loan-to-Values EQUAL to or LESS than 95% on 30 year loans and the new monthly MI premium will be .85%.
• The Annual premium is now .25% for Loan-to-Values GREATER than 90% on 15 year loans.
• There is no monthly MI premium Loan-to-Values EQUAL to or LESS than 90% on 15 year loans.

FHA is still a fantastic loan program and appropriate for many Dana Point real estate buyers to qualify as FHA is more lenient on credit scores than conventional loans. The reduction in upfront MI (which is typically financed into the loan) is great because this used to be a large part of the down payment. The downside is the monthly MI rise, which will definitely make conventional loans with Private Mortgage Insurance more attractive again for those buyers who can qualify for other loan options as well.

Future Increases
This new law also gives FHA the authority to raise the Annual MI premium, at will, up to 1.5% for Loan-to-Values at or below 95% and 1.55% for Loan-to-Value more than 95%. If that were to occur, FHA loans would be far less competitive than conventional PMI (private mortgage insurance).

If you have questions about the changes to the Up Front and Annual MI premiums and how it will impact your dana point real estate purchase or refinance, please feel free to contact us, we will be happy to help. Look for us and all the mls listings for Orange County, at www.ochomebuyer.com.