Alexandria VA Homebuyers Will Pay More After April 1 With FHA Loans

  Time is money.  And if you're looking at homes for sale in Alexandria VA, and will be buying with an FHA loan, then expect to pay more after April 1.  Cindy Small of Union Mortgage Group provides the following update on the fee increases for FHA loans and what they mean for buyers in terms of closing costs and monthly payments.

FHA is raising mortgage insurance dramatically and considering several other changes. 

Homebuyers who act now can beat the increase, by indentifying a home and having a written accepted purchase contract.  There are two dates (April 1st and June 1st) and two changes (up front mortgage insurance which is collected at closing & annual mortgage insurance increases) that you need to be aware of .

 1st Change Effective ON APRIL 1ST,  2012

 

The Up Front Mortgage Insurance Premium (UFMIP) will be increased from 1 percent to 1.75 percent of the base loan amount…regardless of the amortization term or LTV (loan-to-value) ratio. FHA will continue to permit financing of UFMIP into the loan amount.  

What does that mean if I'm buying a home now?  How will that affect my out of pocket costs at closing?
Let’s use two examples…one is a $300,000 purchase and the other a $500,000 purchase.  Both are with 3.5% as the down payment… 

$300,000 Purchase Price                                         $500,000 Purchase Price
  - 10,500 @3.5% down                                               -17,500 @3.5% down
$289,500 UFMIP      1% = $2,895                            $482,500 UFMIP      1% = $4,825
  New UFMIP 1.75% = $5,066                           New UFMIP 1.75% = $8,750

           

2nd Change Effective ON April 1st

 The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent. This change is effective for case numbers assigned on or after April 1st.

 What does this mean? A 'case number' is assigned to your loan once you have received an accepted offer, and your lender begins processing your loan and preparing it for underwriting.  This usually happens within 2-3 days after the lender has received your signed purchase offer.

Currently the annual MIP or mortgage insurance premium (what we often refer to as the “Monthly MI”) on an FHA loan depends upon the down payment amount.  Below is the current vs. what it will become on April 1st.

                     Again, these changes are effective for case numbers assigned on or after April 1st

 

**ADDITIONAL CHANGE TO JUMBO FHA ON JUNE 1ST **

 

FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500. This change is effective for case numbers assigned on or after June 1, 2012.

What does this mean?
Let’s us two different examples…one is a $300,000 purchase and the other a $700,000 purchase with 3.5% down.

$300,000 Purchase Price                                         $700,000 Purchase Price
  - 10,500 @3.5% down                                               -24,500 @3.5% down
$289,500 Base Loan Amount                                    $675,500 Base Loan Amount   
        New UFMIP 1.75% = $5,066                                    New UFMIP 1.75% = $11,821
 $294,566 Loan Amount with UFMIP financed          $687,321 Loan Amount with UFMIP  financed
1.25% Mo. MIP = $3,682/12 = $307 per mo.             1.50% Mo. MIP = $10,310/12 = $859 per mo.