Due to a decline in capital reserves, the FHA will be increasing premiums again to FHA buyers who will be obtaining a loan as of April 1, 2012. Here’s your Need to Know info:
- You must be under contract by the end of March 31, 2012 to avoid the rate hike.
- Down-payment requirements remain at 3.5%
- Loan limit remains at $729,750
- Up Front Insurance Premium will increase to 1.75% of the base loan amount (75% increase)
- Annual Insurance Premiums will go up 0.1% point for loans under $625,500
- Annual Insurance Premiums will go up 0.35 points for loans over $625,500
- There is a proposal that cuts the amount a seller can contribute towards your closing costs from 6% to 3% (standard practice for contracts in the DC Metro area are 3% already).
What does this mean in real numbers?
If you’re borrowing up to the max loan limit, your upfront mortgage insurance premium will rise 75% from $7,295 to $12,771. This amount is added to your loan size. FHA upfront MIP is not paid as part of your closing costs. You’ll pay interest on this amount for the life of your loan. (Thanks to Dan Green of TheMortgageReports.com for this example).
In January 2012, FHA loans accounted for almost 10% of the sales in Arlington County. Overall, FHA loans account for about 16% of sales in Northern Virginia.