Insurance for FHA loans increase April 1st, 2012
Back in October of 2010 HUD reduced the upfront Mortgage Insurance Premium (MIP) to 1.00% of the loan amount for FHA buyers. However, a recent announcement stated it will be raising the upfront MIP to 1.75% as April 1st, 2012.
HUD is also considering an increase of the annual MIP and reducing the seller contribution amount but has yet to be confirmed. If so, those changes are expected to take effect June 1st, 2012.
The proposal that would reduce the seller’s contribution amount would modify the current 6% to the greater of 3% or $6,000. This shouldn’t make much of an impact on buyers considering that on a $250,000 loan, the seller contribution is still $7,500.
FHA has become a popular option for condo buyers over the last several years considering the flexible qualification guidelines, however continued increases are likely to make FHA loans less desirable. Conventional loans may become a more preferred option since a well-qualified buyer can qualify for as little as 5% and in some cases, without mortgage insurance depending on the lender/available loan programs.