FHA MIP Increase
As 2009 ends, the United States Department of Housing and Urban Development through its housing agency, the Federal Housing Administration, has released an announcement to ensure the citizens who are enrolled in housing programs that the government has a stable financial condition. Despite the effects of the recession, the Federal Housing Administration has declared an FHA MIP Increase to be able to secure its funds which was greatly affected by the economic recession in the previous year.
Through the FHA MIP Increase, there will be a foreseen increase in the revenues of the Federal Housing Administration without having too much adverse effect on the clients of this housing agency. The customers and the homeowners relying on the FHA will not need to worry too much about the effect of this increase on their mortgages. According to the Federal Housing Administration commissioner, David Stevens, this move will create a balance with the losses the government agency has incurred in the past year by being able to recover financially through this premium increase. Even if there will be an increase in the mortgage insurance premium, the FHA will still continue to provide the most affordable loans for aspiring homeowners and even to those who are having financial dilemmas.
The Federal Housing Administration has released its guidelines on the plan to increase the mortgage insurance premium or MIP. The FHA MIP Increase is primarily intended to increase the capital reserves of the FHA to be able to continually provide private lending. The initial proceeding in increasing the MIP is to pull up the up-front premium to 2.25%. Aside from the increase in the rate, there will also be a legal proceeding to have an increase in the yearly mortgage insurance premium. Once this has been legally finalized, then the upfront premium will be shifted to an annual insurance premium so that the capital reserves will increase without affecting the clients too much since the yearly insurance premium will be settled over the duration of the mortgage. All the customers of the FHA have been updated about these changes.
As for the new clients of the FHA, they will also feel the effects FHA MIP Increase although not that much. With this increase, the new borrowers will need to have a credit score of 580 so that they can only pay a very low down payment of 3.5%. If they won’t reach that credit score, then they have to give an initial payment of 10%. With this guideline, the FHA will be able to secure its capital reserves without negatively affecting the conditions of the older customers and by ensuring that it can still be able to render its services to its responsible borrowers. Aside from these changes, the FHA will also decrease its seller concessions to 3% from the original rate of 6%.
With the FHA MIP Increase, the government has ensured that the capital reserves of the Federal Housing Administration will not continue to deplete. This can be the ideal long term solution for an impending problem in the housing agency.
