FHA New MIP guidelines

The New FHA Mortgage Insurance Premiums’ Benefit

As of October 4th, 2010, FHA has increased the insurance premiums on mortgages, from 0.5% to .9% for the monthly MI, to 1% on the upfront MI.  Despite opposition, it is the best decision taken, as it will reduce the possible loss that lenders might face. The only way to appreciate the situation is to understand it better. It is implemented by HUD; they also have the responsibility to answer all possible questions. The mortgage insurance premiums were increased to help replenish the money FHA has lost over the last few years from some loans defaulting.

If you do not have 20% to put donw or 20% in equity, FHA is your best option. 20% is what lenders look for to minimize their risk tolerance. That is the money that will be the security in case the person cannot pay the money back. This is something that would reduce the lender’s risk factor.

Maybe the new FHA mortgage insurance premiums ought to look like a problem for borrowers. In reality, it is a security for all three parties; the lender, the borrower and FHA. This down payment would ensure the loan is re-paid for the lender; more opportunities to get loans for the mortgage and finally, FHA will not face drastic financial issues.

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