New FHA Upfront MIP for Arizona Homebuyers

New FHA Upfront MIP on Oct. 4, 2010

Effective October 4, 2010, Arizona FHA Homebuyers will see the new FHA Upfront MIP go down as much as 1%.

Over the past 2-3 months, Congress has taken action and passed H.R. 5981. This bill gives FHA the authority to adjust it’s annual mortgage insurance premium yielding approximately $300 million per month to the FHA Mutual Mortgage Insurance Fund at a time when its reserves are perilously low. As a result, FHA has decided that effectively on October 4, 2010, the UFMIP (Upfront Mortgage Insurance Premium) and the Monthly Insurance Premium will change in order to meet the demands of future FHA Homeowners.

What does this mean for you and how does it affect your ability to qualify for an FHA Loan in Arizona?

Arizona FHA borrowers will see a drop in their “Total Loan Amount” which means the loan amount after the down payment plus the FHA MIP that is financed into the loan.
However, it will slightly increase Arizona FHA Homeowner’s monhtly payment.

A portion of your (UFMIP) Up-front Mortgage Insurance Premium is moving from being financed on top of the amount financed (your loan), into a higher amount of monthly mortgage insurance payments through the period of time you carry MI. For many future FHA Homebuyers, this is a very good thing since the total “LOAN TO VALUE” will be less than the outgoing formula. To simplify the equation, the following is an illustration of the current and new FHA Fees based on a 3.50% down payment:

New FHA MI Fees as of October 4, 2010

New UFMIP =1.00% & Monthly MI = .90%

New UFMIP Calculation

Loan Amount of $100,000 x UFMIP of 1.00% = Total amount financed of $101,000

New Monthly MI Calculation

Loan Amount of $100,000 x Monthly MI Factor of .90% = $900 / 12 = Mortgage Insurance per month $75.00

Old FHA MI Fees (Void as of October 4, 2010)

Old UFMIP = 2.25% & Monthly MI = .55%
Old UFMIP = Loan Amount of $100,000 x UFMIP of 2.25% = Total amount financed of $102,250
Old Monthly MI = Loan Amount of $100,000 x Monthly MI Factor of .55% = $550 / 12 = Mortgage Insurance per month $45.83

Direct lender and licensed in Arizona

NMLS #: 228393 • AZ MB License: 0904081 • National NMLS #: 3113