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FHA to Increase Mortgage Insurance Premium Costs on April 1st

In order to increase FHA’s capital reserves, Congress issued a 10 basis points cost increase on all FHA mortgage insurance premiums beginning April 1, 2012. In addition to this increase, HUD has issued an additional increase of 10 to 35 basis points for FHA-backed loans that exceed $625,500. This change will increase the upfront Mortgage Insurance Premium fee to borrowers and it may also affect qualifying ratios.

As a reminder, FHA loans are available to borrowers in high cost areas, such as the San Francisco Bay Area, for as much as $729,750, and in Sonoma to $662,500. FHA-backed loans have historically been an attractive choice for borrowers who want the option of placing a lower down payment, in some cases as low as 3.5% down.

What does this mean for clients? The 35 basis points premium increase for loan amounts between $625,500 and $729,750 may entice some borrowers to seek alternative loan options, which we can discuss in detail should you have questions.

The increased mortgage insurance premiums will affect FHA loans that are issued on or after April 1, 2012. If you have clients currently looking to buy they still have an opportunity to lock in with the current FHA MIP.

FHA Tightens Up Pest Report Requirements

Effective immediately, for all FHA-backed loans, a copy of the pest report will be required if there is any mention of a pest report throughout the transaction, such as in the sales contract, addendum, a fee report or pest repairs showing up on the closing statement, or HUD-1, (which can happen as late as during funding review).

This new guideline requires close communication between the borrower, Realtor and lender. We want to avoid finding out at funding that a pest inspection exists, especially if there are repairs that need to be completed. Although there may be instances when we can make an exception, this will likely affect pricing.

If you have questions about these changes, please contact me directly. I want to prevent potential loan delays due to a last minute discovery that a pest inspection with repairs needs to be completed. Let us know how we can be of assistance to you!
Gayle Arrowood, Registered Mortgage Advisor, Opes Advisors, Inc. 707.529.4321 or garrowood@opesadvisors.com