Federal Housing Administration Commissioner Carol Galante announced two changes to the Mutual Mortgage Insurance (MMI) that will apply to all new FHA loans originated on or after April 1, 2013.
The first change is an increase to the monthly mortgage insurance fee of 0.1% or one tenth of one percent. On a $300,000 loan this will add about $26 a month to the payment.
The second change will cost a lot more over the life of the loan. New loans after April 1 will no longer allow the MMI to drop from the payment once the loan is paid down to 78% of the value. The MMI will now be required for the life of the loan.
FHA will also be increasing the down payment requirements for loans over $625,500. Until April 1, 2013, buyers will still be able to get a loan for up to $729,750 with only 3.5% of sales price as a down payment. After April 1, 2013 buyers applying for FHA loans above $625,500 will require a 5% down payment.
“These are essential and appropriate measures to manage and protect FHA’s single-family insurance programs” said Galante.
She added, “In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers.”