PMI Basics and New Changes in PMI for FHA Loans

PMI (Private Mortgage Insurance) Basics:

Cost is generally one .5% – 1% of the loan amount charged on an annual basis and divided into 12 payments per year

Not Tax deductible

Applied if down payment is less the 20% of purchase price of home

Can be avoided if you pay more interest or if you get a 80-10-10 loan (a loan at 90% and a second loan for 10% at a higher rate brings you to the 80% threshold to avoid PMI)

PMI for FHA Loans is increasing in 2013. Below is a summary of the FHA Changes:


Changes April 1, 2013…

  • Cost of Monthly Mortgage Insurance is increasing by additional 10 basis points annually – (see 1st table below)

Changes June 3, 2013…

  • Time period (duration) borrower must keep mortgage insurance is increasing
  • 30 Year Mortgages with less than 10% down will require buyer to keep mortgage insurance for entire term of the loan (See 2nd table below)
  • For more information about these changes, contact Perry Gaa (917-881-4944) at our affiliated Citibank lending group.

New Cost of Mortgage Insurance
Effective for case #’s assigned after 4/1/13…
– Applies to FHA loan amounts less than $625,000

LTV Ratio Annual Premium for over   15 Years and up to 30 Years

LTV Ratio

Annual Premium for Loans   15 Years and Under
95.00% and Under 1.30% 78% and under 0.45%
95.01% and Over 1.35% 90.00% to 78.01% 0.45%
90.01% and Over 0.70%

FHA – New Term of Mortgage Insurance

Changes effective for case #’s assigned after 6/3/13…

    •   Revision to the period for assessing the annual MIP;
    •   Removal of the exemption from the annual MIP for loans with terms of 15 years or less and LTVs of less than or equal to 78 percent at origination;
    •   Increase in the annual MIP for mortgages with terms less than or equal to 15 years and LTV ratios less than or equal to 78 percent at origination.

TERM

LTV (%)

PREVIOUS

NEW

≤ 15 yrs

≤ 78

No annual MIP

11 years

≤ 15 yrs

> 78 – 90.00

Cancelled at 78% LTV

11 years

≤ 15 yrs

> 90.00

Cancelled at 78% LTV

Loan term

> 15 yrs

≤ 78

5 years

11 years

> 15 yrs

> 78 – 90.00

Cancelled at 78% LTV & 5 yrs

11 years

> 15 yrs

> 90.00

Cancelled at 78% LTV & 5 yrs

Loan term

2 thoughts on “PMI Basics and New Changes in PMI for FHA Loans

Leave a Reply