The Federal Housing Administration (FHA) just announced on Monday February 27th, 2012 that they will be increasing the annual mortgage insurance premium on new San Diego FHA loans for all purchase and refinance transactions.
FHA loans in San Diego will have their annual mortgage insurance premium (MIP) increased by 0.10 % for loans under $625,500 and by 0.35 % for loans above that amount up to the San Diego FHA Loan Limit of $679,500. On a $300,000 30 year fixed FHA loan in San Diego with a Loan to Value (LTV) ratio of 95% or greater the premium will be increasing from 1.15% to 1.25%. That is approximately $25 more per month. On a $625,500 loan the premium will be increasing to 1.50% and will cost $182 more per month. To calculate the monthly mortgage insurance payment on a FHA loan, take the base loan amount and multiply it by the annual mortgage insurance premium percentage and divide by 12.
There are multiple reasons for the increases. The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual Mortgage Insurance Premium it collects by 0.10 percent. This change is effective for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 % on top of the .10% increase to mortgages exceeding $625,500. This change is effective for case numbers assigned on San Diego FHA loans on June 1, 2012.
The Upfront premiums will also be increased by 0.75 % to 1.75% of the base loan amount for FHA loans in San Diego. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to allow financing of this charge into the mortgage. This change will be effective for case numbers assigned on or after April 1, 2012.
Acting FHA Commissioner Carol Galante stated “After careful analysis of the market and the health of the MMI fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market.” “These modest increases are one of several measures we are taking towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers.”
These changes will not affect you if you currently have an FHA loan in San Diego, but if you or anyone you know were thinking of purchasing or refinancing with an FHA loan, now would be the time to pursue it before the changes take place. Feel free to contact me, a 10 year San Diego Mortgage Broker veteran, with any questions you may have. You can also obtain a free mortgage quote HERE.