![]() Some borrowers might choose to finance the premium just to reduce their up front costs, but others may finance it so they can pay for other closing costs in cash such as purchasing discount points to reduce the amount of interest on the mortgage. You can’t pay part in cash and finance the rest. What’s the catch? You must either pay the entire amount in cash on closing day OR finance the entire amount into the mortgage. But one important feature to remember about the Up-Front Mortgage Insurance Premium is that you do not have to pay it in cash up front at closing time.īorrowers have the option to include the premium in the loan amount instead. In the case of the Up-Front Mortgage Insurance Premium, your cost will be a percentage of the loan amount–1.75% at the time of this writing. And part of being ready is understanding what costs you may be responsible for up front.ĭo you know what to anticipate needing to have saved for your new loan? There are two important areas to begin with–your down payment, and the FHA Up-Front Mortgage Insurance Premium which is part of your closing costs.īoth the down payment and the UFMIP calculations require at least a rough estimate of what the asking price of the home and/or the amount of the mortgage might be you can ballpark the price of the home and run the calculations to get an estimate of what you are required to save. ![]() Without enough lead time to save for your up front costs and prepare your credit you may fill out an application without being truly ready. Additional changes to mortgage insurance premiums and policies to ensure FHA’s long term financial soundness are likely to be forthcoming.The amount of planning and saving time you give yourself ahead of your home loan application is very important. New regulations have been added to increase the net worth requirements of FHA-approved lenders, strengthen lender approval criteria, and make lenders liable for the oversight of mortgage brokers. If a computed loan-to-value ratio is not possible, due to missing data or previous refinancing without an appraisal, the new LTV will default to 89.99%.Įarlier this year the Federal Housing Administration increased the UFMIP rate to 2.25% for most loan types. The new loan amount, excluding the Upfront MIP, is divided by the lower of the sales price or appraised value amount contained in SFIS. The LTV on those loans is based on data in FHA’s Single Family Insurance System (SFIS) for the mortgage being refinanced. A minimum of five years of MIP must be paid on loans with terms over 15 years before the MIP payments are no longer required ( see FHA Handbook 4155.2 7.3.c for details concerning Annual MIP cancellation).Ī common question is what property value to use in the LTV calculation for FHA Streamline Refinances when a new appraisal is not required. The Annual MIP drops off once the loan reaches 78% LTV, and again the Upfront MIP amount is left out for this calculation. The official Monthly MIP schedule using the Annual Average Outstanding Balance can be accessed in FHA Connection under Single Family Servicing -> Mortgage Calculator. Although the payment schedule on the TIL will still reflect potential rate changes for Adjustable Rate loans, the initial interest rate is used to calculate the Annual Average Outstanding Balance for each year. ![]() ![]() Since a different “Annual Average Outstanding Balance” is calculated for each year of MIP, the TIL payment schedule contains a series of 12 payments at each MIP amount, even for Fixed Rate loans. This amount is then divided by 12 for the monthly MIP payment. The Annual MIP is calculated for each year by taking the average of the 12 balances for that year (without the Upfront MIP amount) and multiplying it by the applicable rate percent (currently 0.55%, 0.50%, or 0.25%). HUD’s actual FHA Annual MIP calculation is more involved. This is done so lenders will know it is not the official calculation of the periodic MIP. Some underwriters still utilize the shorthand calculation, and the resulting value has been labeled by HUD as “Estimated Annual MIP Amount” on one of the FHA Connection MIP Calculator Results screens. They will no longer purchase loans with Federal Truth-in-Lending Disclosure Statement payment streams that do not use the accurate Annual MIP calculation. Investors such as GMAC have cracked down on FHA loans where the Conventional PMI calculation has been used instead of the actual FHA MIP calculation required by 24 CFR §203.260-203.261. The loan amount is multiplied by the initial PMI rate percent, and then divided by 12 to get the monthly payment. Questions concerning the FHA Annual Mortgage Insurance Premium calculation are common.įor Conventional loans, the monthly PMI amount is easy to calculate. With the ongoing changes in the mortgage industry, and fewer options for borrowers, more lenders are turning to FHA loans to increase their business.
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