FHA Mortgage Insurance

Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance primarily for borrowers making a down payment of less than 20 percent.

New FHA Annual Mortgage Insurance Premium
President Obama signed a bill in August of 2010 giving HUD the flexibility to increase Annual Mortgage Insurance Premiums. According to Mortgagee Letter 11-10, the increase in Annual Mortgage Insurance Premiums will be effective for all case numbers dated on or after April 18th 2011.

HUD is implementing a 25 basis point increase in the annual premium for terms of greater than 15 years and equal to or less than 15 years. On loans with greater than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 5%, the new Annual Premium is 110 basis points (bps). If the down payment is less than 5%, the new Annual Premium is 115 basis points (bps).

On loans equal to or less than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 10%, the new Annual Premium is 25 basis points (bps). If the down payment is less than 10%, the new Annual Premium is 50 basis points (bps).

Upfront Mortgage Insurance Premium
Effective for loans on or after October 4th, 2010, for FHA regular purchases and refinance products, the Upfront Mortgage Insurance Premium is 1.00%, which decreased from 1.5%. This amount remains unchanged.

FHA's monthly mortgage insurance payments will be automatically terminated when these conditions occur:

• For mortgages with terms 15 years and less and with Loan to Value ratios 90 percent and greater, annual premiums will be canceled when the Loan to Value ratio reaches 78 percent regardless of the amount of time the mortgagor has paid the premiums.
• For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78 percent, provided the mortgagor has paid the annual premium for at least 5 years.
• Mortgages with terms 15 years and less and with loan to value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.

Home Equity Conversion Mortgages, or HECM for short, are designed to help qualified borrowers take out an FHA guaranteed loan against the equity built up in their property. What does it take to be eligible to apply for an FHA home loan? FHA requirements include details about income, credit rating and other factors, but before a loan officer looks at any of that information, an applicant has to meet the basics. If you had Upfront Mortgage Insurance on FHA mortgages signed on or after December 8, 2004, you would not be entitled to a refund from the FHA on your Upfront Mortgage Insurance.