Important Changes To FHA Insurance Premiums

By Doherty • March 18th, 2011
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Mortgage insurance is an insurance policy that protects FHA lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance for FHA loans that are originated.

Upfront Mortgage Insurance Premium

Efficient as of October 4th, 2010, for FHA regular FHA home purchases and FHA home refinance mortgage loans, the Upfront Mortgage loan Insurance Premium is 1.00%, that is being reduced from 1.5%.

FHA’s monthly mortgage insurance premium payments will be immediately terminated once these conditions happen:

  • FHA Mortgages with loan terms 15 years and less and with a loan to value ratio of 89.99 % and less will not be charged annual mortgage loan insurance premiums.
  • For FHA mortgage loans with terms over 15 years, the annual FHA home loan insurance coverage premiums will be canceled when the Loan to Value ratio reaches 78 %, as long as the mortgagor has paid the annual premium for at least five years.
  • For FHA home loans with terms 15 years and less and with Loan to Value ratios 90 % and higher, yearly premiums will be canceled once the Loan to Value ratio reaches 78 percent irrespective of the total amount of time the mortgagor has paid the premiums.

Annual Mortgage Insurance Premium

President Obama signed a bill in August of 2010 providing HUD the flexibility to increase Annual FHA Mortgage loan Insurance Premiums. Under the law, effective as of October 4th, 2010, HUD is allowed to increase the total amount of the Annual Home loan Insurance coverage Premium from .5% to 1.5% on mortgage loans with a down payment of 5% or more. The Insurance coverage Premium on loans with less than 5% down payment increased from .55% to 1.55%.

HUD is not putting into action the maximum amount at this time. As of October 4th, 2010, mortgage loans with a down payment equivalent to or higher than 5% will be charged a Yearly premium of .85% and loans with a down payment of less than 5% will be charged .90%.

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