The FHA is making some changes to the UMIP, or Up Front Mortgage Insurance Premium, effect October 4, 2010. The premium, which is charged at closing and added into the principal value of the loan, is being reduced from 2.25% to 1%. The monthly Mortgage Insurance Premium, which is added into the monthly payment, is going to increase. The amount of the increase depends on the loan-to-value of the loan.
What does this mean to you?
The lower premium up-front will reduce the overall amount you owe when purchasing or refinancing a home with an FHA loan. For example, on a $200,000 loan, the up-front premium would drop from $4,500 to $1,000. Assuming someone put 5% down ($10,000), the principal due would drop from $194,500 to $191,000. Their montly payments would, on average, increase by about $60.
Thanks for the update. I hope this change will help qualify more borrowers.
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