It's about to get a lot cheaper to refinance an FHA mortgage -
provided you've had it for at least three years.
Effective June 11, the FHA is reducing the fees it charges
borrowers who refinance a current FHA mortgage obtained prior to
June 1, 2009. At the same time, it's raising the annual mortgage
insurance premiums charged on jumbo mortgages with base loan
amounts of more than $625,500.
Fees slashed on streamlined refinances
Here are the changes: For borrowers doing a streamlined
refinance of a home mortgage insured by the FHA on or before May
31, 2009, the upfront mortgage insurance premium charged at closing
drops to 0.01 percent of the base loan amount, down from 1 percent
previously. On a $200,000 mortgage, that means paying only $20
instead of the $2,000 currently charged.
Meanwhile, the annual insurance premium on those same loans is
being reduced to 0.55 percent of the loan amount, down from 1
percent currently. So on a $200,000 streamline refinance, the
annual fee would drop to $1,100, down from $2,000 presently.
A streamlined refinance is a near-automatic refinance for
borrowers who presently have an FHA mortgage and are current on
their payments, even if they're underwater on their mortgage. Some
limitations do apply.
Fees going up on jumbo loans
At the same time, the FHA is increasing the annual insurance
premium on jumbo mortgages by a quarter of a percentage point
across the board. Annual fees on FHA mortgages with base loan
amounts over $625,500 will now be as follows:
• 30-year fixed-rate mortgages with loan-to-value ratios of
greater than 95 percent (i.e., 5 percent or less down payment or
home equity): 150 basis points, or 1.5 percent, per year.
• 30-year fixed-rate mortgages with loan-to-value ratios of 95
percent or less: 125 basis points, or 1.25 percent.
• 15-year fixed-rate mortgages with loan-to-value ratios of
greater than 90 percent: 85 basis points, or 0.85 percent.
• 15-year fixed-rate mortgages with loan-to-value ratios of 90
percent or less: 60 basis points, or 0.85 percent.
For mortgages with base loan amounts of $625,500 or less, the
annual insurance fee remains 25 basis points below the above
figures. The annual insurance premium is waived for FHA mortgages
with loan-to-value ratios of 78 percent or less and amortization
terms of 15 years or less.
On standard FHA home purchase mortgages, the upfront mortgage
insurance premium is 1.75 percent.
Other fees recently increased
The FHA recently raised many of its fees to help make up for
losses incurred due to bad loans. However, it is reducing fees on
refinancing in order to make it easier for borrowers with
established mortgages to qualify for lower interest rates.
Because of their added fees, FHA mortgages have traditionally
accounted for only a small part of the mortgage market, but in
recent years have increased to where they currently account for
about one-third of all home purchase mortgages, owing in large part
to the fact they are one of the few places that non-veterans can
still obtain mortgages with as little as 3.5 percent down.
First published on MortgageLoan.com at: