FHA to increase Mortgage Insurance Premiums

This is important news to anyone considering an FHA mortgage. See full story below:

HUD No. 12-037 HUD Public Affairs (202) 708-0685

FOR RELEASE Monday February 27, 2012

FHA TAKES ADDITIONAL STEPS TO BOLSTER CAPITAL RESERVES
New premium structure will help protect FHA’s MMI fund

WASHINGTON – As part of ongoing efforts to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante today announced a new premium structure for FHA-insured single family mortgage loans. FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount. Upfront premiums (UFMIP) will also increase by 0.75 percent.

These premium changes will impact new loans insured by FHA beginning in April and June of 2012. Details will soon be published in a Mortgagee Letter to FHA-approved lenders.

“After careful analysis of the market and the health of the MMI fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market,” said Galante. “These modest increases are one of several measures we are taking towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers.”

The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent. This change is effective for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500. This change is effective for case numbers assigned on or after June 1, 2012.

The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012.

FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month. These marginal increases are affordable for nearly all homebuyers who would qualify for a new mortgage loan. Borrowers already in an FHA-insured mortgage, Home Equity Conversion Mortgage (HECM), and special loan programs outlined in FHA’s forthcoming Mortgagee Letter will not be impacted by the pricing changes announced today.

Taken together, these premium changes will enable FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) Fund, contributing more than $1 billion to the Fund, based on current volume projections through Fiscal Year 2013.

Your offer has been accepted!

Your offer has been accepted! Congratulations! You are on your way to becoming a happy homeowner. However, before you can take possession of your new home, there are several important steps that need to be taken. Having a Buyer's Representative to guide you through this process makes your life less stressful and could save you from making a costly mistake. Every transaction is unique, but the most important steps include:

1. Complete a home inspection - Assuming this contingency was in your contract, you will want to schedule the inspection with a qualified home inspector. He will provide you with a detailed report of any problems found in your home. If he finds severe issues, then you may want to walk away from the contract, assuming you have that option. If you feel the issues are not too major, then you can submit a list of requested repairs to the Seller. Laws vary in every state, but keep in mind that Sellers are generally only required to repair issues with major systems. Examples would be; structure, roof, electrical, plumbing, etc. Cosmetic issues are not required, but can be negotiated depending on the deal.
2. Complete a Termite Inspection - In addition to the home inspection, you will also want to consider getting a termite inspection. If you plan on obtaining a loan to pay for your house, the bank will almost certainly require one. The termite inspection is called a CL-100 report. It will tell you whether there is active or past evidence of wood destroying insects, moisture issues under the house, and if there is enough damage to warrant repair.
3. Choose an Attorney - Your real estate attorney serves an important role. Make sure to choose one early in the process and schedule his or her participation in your closing.
4. Finalize Your Mortgage - Hopefully you you chose your lender prior to getting your home under contract. In today's market, most seller's expect you to be "pre-approved" by a reputable lender before they will consider your offer. Once you are under contract, you should immediately contact your lender to let them know and supply them with all the details they need. Mortgage underwriting in today's market has become complicated to say the least. In many cases securing a loan can take up to 45 days, so don't procrastinate!
5. Prepare to Move - The importance of this step is sometimes overlooked due to all the work leading up to closing. Decide if you will use a moving company or somehow persuade your friends to help. If you choose the latter, do not expect them to remain your friends after the move! You will also need to coordinate with your utility companies, post office, bank, credit card companies, insurance agent, attorney, and any other businesses or individuals that need to know you will be moving.
6. Final Walk Through - The final walk through should be performed as close to closing as possible. You want to check for three things: 1) make sure the home was not damaged when the Seller moved out, 2) ensure all contracted items, such as appliances, are still in the home, and 3) make sure all agreed upon repairs were completed. If there were a lot of repairs made, it is usually best to have your home inspector return for a re-inspection.
7. Prepare to Pay Closing Costs - In all the work and excitement leading up to closing, don't forget that you most likely need to bring a check to closing. You should have received a final HUD statement from your attorney (depending on your state of residence) that outlines final closing costs. Double check the figure and don't be afraid to question it if you think it is wrong. Mistakes happen! You will also want to find out what form of payment will be accepted. A personal check will not be accepted in most cases.

I hope this brief contract to closing outline helps you. Please do not hesitate to contact your Realtor for more information or help with your next purchase!

Drew Parker is the owner and Broker in Charge of The Parker Company real estate in Greenville, SC.