FHA Mortgage Insurance Changes Coming in Dallas Texas
This week, FHA Commissioner David Stevens announced a reduction in Upfront Mortgage Insurance Premiums (UFMIP) for Dallas First Time Home Buyers and FHA Streamline Refinances on Dallas homes.
This change was prompted by passage of H.R. 5981 in the Congress, and reduces the upfront mortgage insurance premium to 1% from the current 2.25%.
Good news you say? Well, as ESPN Commentator Lee Corso says, “Not so fast, my friend!”
At the same time, the annual mortgage insurance premium, currently at .55% for the minimum down payment of 3.5%, will go up to .90%. For down payments of 5% or more, the annual mortgage insurance may go up to .85% from the current .50% on a 30 year fixed loan. More details from FHA will be released in the next few weeks.
Let’s look at an example of a $200,000 loan amount to see how it impacts borrowers.
| Current | Proposed | Difference | |
| Upfront Mortgage Insurance Premium | $4,500 | $2,000 | A savings of $2,500 upfront. |
| Monthly Mortgage Insurance Premium | $91.67 | $150.00 | A loss of $58/month, which equates to $3,500 in 5 years. |
| Qualifying Monthly Income Needed | $5,274 | $5,462 | Requires $188 extra income per month to qualify for the same amount. |
As you can see in the table above, the policy change increases the monthly payment on an FHA loan and requires higher income to qualify for the same loan amount. While the reduction of upfront mortgage insurance premium is a welcome move, most Dallas First Time Home Buyers are not severely impacted by this because it typically gets added to the loan amount. On the other hand, the increase of the monthly premiums definitely is detrimental to FHA borrowers. Overall, the new policy will end up costing borrowers more. Imagine that.
The new mortgage insurance premium structure will go into effect on September 7, 2010.
If you are thinking about buying a home or refinancing, you still have time to obtain the current rates if you act quickly.
Click the link to read FHA Commissioner David H Stevens’ announcement on this topic.
We are a Dallas-based FHA Expert and will be glad to advise you if FHA loans are a good option for financing your home. To schedule a free consultation, please email me at john@dallasmortgagepro.com or call my office at 972.523.3381.
