Order to keep FHA a float, aafter this week ends, the FHA is raising mortgage insurance premiums on its new Georgia borrowers and the rest of the county of course. It's the FHA's third such increase in the last 12 months. Since FANNIE and FREDDIE MAC are insolvent the US government must keep FHA the program solid.
Beginning with FHA Case Numbers assigned April 18, 2011, mortgage insurance premiums will be higher by 25 basis points per year, or 0.25%.
Against a $200,000 loan size, the MIP increase adds $500 to an FHA-insured borrower's annual cost of home ownership. All new FHA loans are subject to the increase -- purchases and refinances.
Existing FHA-insured homeowners across Georgia are unaffected. A very important part of the announcement is that ppremiums do not rise for loans already made! But if you are thinking about a purchase or refi...better move
FHA had to increase its mortgage insurance rates because, as a group, the FHA is insuring a much larger percentage of the U.S. housing market.
In 2006, the FHA held a 4 percent market share. By 2010, that share ballooned to 19 percent and, today, it's estimated to be even higher. Most guess its nearer 45% in some markets
In its official statement, the FHA says that the quarter-point MIP bump will "significantly strengthen" its reserves which are depleted because of delinquencies and defaults. By law, thank God, the FHA's capital reserves must meet certain levels.
Therefore, to meet these requirements, the FHA is rolling out its new mortgage insurance premium schedule:
- 15-year loan term, loan-to-value > 90% : 0.50% MIP per year
- 15-year loan term, loan-to-value <= 90% : 0.25% MIP per year
- 30-year loan term, loan-to-value > 95% : 1.15% MIP per year
- 30-year loan term, loan-to-value <= 95% : 1.10% MIP per year
The FHA also charges a 1 percent, up-front mortgage insurance premium at closing. That figure remains unchanged.