On October 4th 2010 the Federal Housing Administration (FHA) increased its monthly mortgage insurance premium as follows:
LTV ( Loan To Value ) < 95%
NEW AMOUNT is 0.85% up from 0.50%
LTV > 95%
NEW AMOUNT is 0.90% up from 0.55%
They also DECREASED the upfront mortgage insurance to 1.00% which previously was 2.25%.
What does this mean for the buyer? It translates to an increase in monthly payments but a decrease in closing costs. The upfront costs that the buyer bears can often be financed into the loan or paid as closing costs. The increase in MI (Mortgage Insurance) will impact a number of buyers – will it mean they will need to allocate funds from other sources to cover the gap or will it mean waiting longer to purchase?
This will certainly impact some buyers and it will be interesting to see the ramifications, if any it’ll have on the market….