FHA Monthly M.I.P. Goes Up Again By .25% On April 18, 2011

Pic credit to Renjith Krishnan

For the second time in 6 months, it just got more expensive for a California first time homebuyer to own a home.   FHA has increased the monthly mortgage insurance premium.  The new premium will go up an additional .25% April 18, 2011. 

A California first time homebuyer with less than 5% to use for a downpayment and less than a 700 FICO score will more than likely have to use an FHA loan to buy their home.  Let’s look at a scenario and crunch some numbers.  Say a prospective homebuyer is looking at buying a home for $350,000 and has a 3.5% downpayment and a 680 FICO score.  That is an FHA type of borrower.

The homebuyer must pay an upfront MIP, mortgage insurance premium, fee of .90% of the loan amount which on a loan amount of $337,750 is $3,039.75.  This fee is is among the other lender and loan related  costs it takes to buy a home.  The seller of the home may pay this on behalf of the buyer and in this buyers market, this is happening quite frequently.

In addition to the upfront MIP, the borrower will have to pay a monthly MIP as well.  Using the above loan scenario, the new monthly MIP factor for a loan with 3.5% downpayment will be 1.15 gets multiplied by the loan amount of $337,750 and that equates to $323.68/mo.  That is up from $253.31/mo when the monthly MIP factor was .90%

FHA mortgage insurance is tax deductible, but not everyone qualifies for the deduction.  Please take a look at my prior “PMI a tax deduction who knew”  post for more info.  Nevertheless owning a home still has more advantages versus renting a home.


Kevin Walton

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