FHA (Federal Housing Administration) Changes

FHA is changing their rules for financing; not one by one, but two and three at the time. These changes will effect how you can borrow money and be insured by FHA.

The government is doing it again as FHA loans are about to become a little more expensive, therefore making it harder for everyone to qualify; not just the low to medium income borrower. This will also affect the high cost areas qualifying status as well. This is mainly due to FHA having become the loan product of choice and affordability in the most recent years. They have come from 3% of the market to 25%, with default having grown in substantial amounts as well. They gained more game in the production due to 3.5% down payments, and 6% seller paid concessions.

Why FHA is Making Changes

Three Major Changes

Due to FHA’s vast growth, and the delinquencies that have occurred; the agency's insurance fund of capital reserves have almost diminished. The government mandates a certain level of reserves that FHA is required to have. With the delinquencies that have occurred, modifications, refinances, and short sales; the reserves have depleted far under the reserve requirement.

Three Important Changes:

MIP (mortgage insurance premium)

Seller Concessions, (not finalized yet)

Loan Limit changes

On March 6^th, 2012 all approved Mortgagees receive a Mortgagee Letter that gave these parameters for MIP changes effective April 9, 2012

FHA MIP (Mortgage Insurance Premiums) Changes

Up Front MIP and Annual MIP

UFMIP (up front MIP premiums) – those premiums charged and added into the loan amount at origination: FHA will still allow this amount to be financed in the loan.

The UFMIP will increase to 1.750% from 1.000% of the base loan amount

Example: $250,000 loan x 1.750% = 4,375; Total loan amount =$254,375.

Annual MIP = Monthly MIP paid in PITI mortgage payment

Term > 15 Years

Base Loan

LTV

Effective

Annual MIP

All

≤ 95.00%

April 9, 2012

1.20% or .0120 x base loan amt.

All

> 95.00%

April 9, 2012

1.25% or .0125 x base loan amt.

Term ≤ 15 Years with LTV above 78%

All

≤ 90.00%

April 9, 2012

.350% or .00350 x base loan amt.

All

> 90.00%

April 9, 2012

.600% or .00600 x base loan amt.

Note: SF forward mortgages with amortization terms of 15 years or less, and a loan-to-value (LTV) ratio of 78 percent or less, remain exempt from the Annual MIP.

FHA Loan Limits

Loan Limits for Single Family and Multi Family

Property Size	Low Cost Area “Floor”	High Cost Area “Ceiling”
One Unit	$271,050	$625,500
Two Unit	$347,000	$800,775
Three Unit	$419,425	$967,950
Four Unit	$521,250	$1,202,925

Property Size	FHA Maximum Loan Limits for Alaska, Hawaii, Guam, and Virgin Islands
One Unit	$938,250
Two Unit	$1,201,150
Three Unit	$1,451,925
Four Unit	$1,804,375