Effective for FHA loans for which the case number is assigned on or after April 5, 2010. FHA will collect an upfront mortgage insurance premium (UFMIP) of 2.25 percent. This policy change will increase premiums for purchase money and refinance transactions. This includes the FHA to SHA streamline refinance.
The current UFMIP is set at 1.75% of the loan amount and is typically included in the loan amount or must be paid in full at closing. As of right now monthly insurance premiums will remain as is (.55% or lower). The reason for the UFMIP increase is to help FHA reach its reserve requirement set by Congress. With the increasing default rate, steps are needed to make sure the program can stay healthy with tax payer help.
The increase in the UFMIP is minimal compared the possibility of a monthly mortgage insurance premium increase. The UFMIP is rolled into the loan and does not heavily impact mortgage payments the way an increase in monthly insurance premiums can.
If you are thinking of buying real estate with FHA financing start before April 5, 2010. The first time or repeat home buyer tax credit is ending soon. With all the changes in loan products, rates, tax incentives, ask now before it is too late.
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