On August 12, 2010, the President signed a law which provided HUD with flexibility regarding the mortgage insurance programs.  Effective October 4, 2010 the upfront premium will decrease from 2.25% to 1.00%.  Conversly, the annual premium (monthly mortgage insurance as you know it) will increase from .55% to .90% for loans with an LTV greater than 95%.  I have provided an example below of the effect on a $225,000 purchase price with 3.5% down at 4.5%.

Current FHA Guidelines

MIP = $4885.00

Monthly PMI = $98.79

Monthly PI&PMI payment = $1,223.68

New FHA Guidelines

MIP = $2171.00

Monthly PMI = $161.65

Monthly PI&PMI payment = $1,272.79

Difference in total payment = $49.11 more under the new rules.

Keep in mind, these changes were made to keep FHA solvent.  By enacting these new changes they will continue to operate with no interruptions and no funding problems.  Let me know if you have any questions or concerns.

Courtesy of:   Eric Baitinger   Cornerstone Financial Mortgage   215-654-6085