FHA Changes Means Your MIP May NOT Be Falling Off Anymore
Contrary to previous FHA guidelines, even before the changes made in April of 2013, many Americans do not have the luxury of FHA mortgage insurance monthly (termed in the mortgage industry as annual mortgage insurance) dropping off at 78% loan to value anymore. Throughout the recent 5 years, FHA has made lots of changes, and as of June 3rd, 2013, this change was installed.
Actual FHA Changes June 3, 2013 Layman’s Terms
Previously, if you had your FHA mortgage at least 5 years, and your loan compared to the value of your home was at 78%, then the monthly portion, termed annual mortgage insurance by the FHA, would fall off. If your FHA case number was ordered on or after June 3rd of 2013, then you will have a monthly mortgage insurance payment for the duration of your loan IF your original loan compared to the purchase price (or appraised value if your current FHA mortgage was a refinance) of your home was over 90%. In my experience in 13 years, most of my FHA clients use the FHA mortgage for its low down payment option, so most of my clients started with a down payment of 3.5%, therefore having a loan to value of 96.5%. If your original FHA loan was originated with a loan to value amount below 90%, then your mortgage insurance can fall off after 11 years.
FHA Mortgage Letter Explanation of Changes
Below is how it reads exactly off the FHA Mortgage Letter stating the changes:
- The first 11 years of the mortgage term, or the end of the mortgage term, whichever occurs first, if your mortgage had an original principal obligation (excluding financed UFMIP) with a loan-to-value (LTV) ratio of less than or equal to 90 percent; or
- The first 30 years of the mortgage term, or the end of the mortgage term, whichever occurs first, for any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent.
If you are interested in knowing about other changes recently made in FHA, or the basics of the FHA mortgage, read through in this link. All about FHA mortgage and other changes