FHA will be raising their mortgage insurance rates sometime in 2013. For loans with the minimum down payment of 3.5%, the annual mortgage insurance rate will go up from 1.25% to 1.35%. For a $200,000 loan, that means the monthly payment will go up by $16.67.
Also, FHA has announced that the mortgage insurance will no longer go away when the borrower has 22% equity in the property. Instead, it will remain in effect until the loan is paid in full.
It is important to keep in mind that with FHA loans, the mortgage insurance is based on the remaining loan balance, so even though the mortgage insurance will not go away, it will go down each year.
Many people will say that these new rules are the end of the FHA loan program, but they are mistaken. FHA loans will remain an excellent choice for borrowers who want to minimize their down payment.
These new rules are ONLY for new FHA loans, and a start date has not been announced yet, other than sometime in 2013. If you already have an FHA loan, or are in the process of getting one at the moment, nothing will change.
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