No Fooling: Mortgage Loans Getting More Costly Come April 1

There’s no April Fool’s about it: new FHA regulations will make mortgage loans more expensive in just a few short days. Major changes coming down the pike make it even more urgent that you get clients into the pre-approval process before April 1, 2012.

What’s happening? The Upfront Mortgage Insurance Premium (MIP) is going up. I checked in with Marcus McCue over at Guardian Mortgage to see what the hec homebuyers need to know:

• The MIP applies to both FHA purchase and refinance transactions

• The FHA Upfront MIP (which rolls into the loan amount) will increase from 1.00% to 1.75%.

• $1,500 will go on the loan balance of a typical $200,000 loan, and increase homebuyer’s monthly payments about $7.00 ($420 over just five years) at current FHA rates.

• The FHA Annual MIP (which is the monthly MIP included in the borrowers mortgage payment) on a 30-yr Fixed will increase from 1.15% to 1.25% with a down payment of 5.00% or less.

• Homebuyers will pay an additional $16 a month ($960 over just five years) for their Annual MIP if they have a typical $200,000 loan.

• Affects all FHA case numbers assigned on or after April 1, 2012.

For a typical $200,000 loan, that adds up to $1,380 during the first five years alone. FHA case numbers are assigned when a borrower applies for financing with the lender and has a verbal accepted offer or executed contract on the home, so getting them pre-approved now to ensure a quick-turn on an offer and contact when submitted to the seller could save your clients thousands over the life of the loan.

Stay tuned for even more changes in the FHA program expected later this year, including the possibility of a reduction in the seller concessions to the buyer of 3.00% or $6,000 (whichever is higher).

Editor’s note: Grrrrreeaatttt…