Changes to FHA 15 Year Loan
The second wave of FHA mortgage insurance changes hit on June 3rd, 2013 and include changes to 15 year fixed rate mortgages and the ability to remove mortgage insurance.
On June 3rd, a FHA mortgage with a term of 15 years or less and UNDER 78% loan to value jumps from no mortgage insurance premium to an annual premium of .45% of the loan amount.
Here’s an example: On a loan amount of $300,000 on a home worth over $385,000, this increase would add $112 to your monthly payment.
|Base Loan Amount||LTV||Previous MIP||New MIP|
|Any Amount||<78.00%||0 bps||45 bps|
Mortgage Insurance Cancellation Changes
Perhaps the most drastic of the changes to FHA mortgage insurance removing the ability to remove MIP after 5 years.
Currently, after 5 years, if the principle balance is paid down to 80% of the purchase price or appraised value (whichever is lower), the borrower can petition to have mortgage insurance removed.
Once the loan to value reaches 78% of the purchase price or appraised value (whichever is lower) FHA mortgage insurance could be automatically removed. Not anymore.
|<15 yrs||<78||5 years||11 years|
|<15 yrs||>78 – 90||Cancelled at 78% LTV||11 years|
|<15 yrs||>90||Cancelled at 78% LTV||Loan term|
|>15 yrs||<78||5 years||11 years|
|>15 yrs||>78 – 90||Cancelled at 78% LTV & 5 yrs||11 years|
|>15 yrs||>90||Cancelled at 78% LTV & 5 yrs||Loan term|
How Do I Avoid Permanent Mortgage Insurance?
The effective date of June 3rd, 2013 means that any FHA loan that is assigned a FHA case number on or after June 3rd will be subject to changes in the ability to remove the annual Mortgage Insurance Premium.
If you qualify for an FHA mortgage already (income, assets, credit score) the most important thing you need to secure a FHA case number is a property address.
If you are purchasing a new home, the address you use to secure a FHA case number MUST be the home you purchase. If you try to acquire a FHA case number on a house that you are making offers on, and you do not get your offer accepted, the case number would be invalid. Your FHA case number is explicitly tied to the home address.