There is another change coming to the FHA mortgage insurance guidelines on October 4, 2010. Starting on that date the upfront mortgage insurance premium (MIP) for FHA loans is scheduled to be reduced from 2.25% to 1.00%. That should reduce closing costs on FHA loans significantly going forward. However the monthly mortgage insurance fees will be increasing from 0.55% annually to at least 0.90% which will increase monthly payments for new FHA loans. Here is a bit from a recent HousingWire article on the subject:
“While premium increases are never ideal, this bill was necessary to help improve the strength and stability of FHA’s single family programs,” said MBA chairman Robert Story Jr. “We are encouraged that FHA Commissioner [David] Stevens has indicated he may not need to raise premiums to the maximum, and we believe that that a small increase in the annual premium, coupled with a decrease in FHA’s upfront premium [calculated in the chart below, from the FHA], will help stabilize FHA while lowering closing costs for many borrowers.”