FHA Increases Cost of Upfront Mortgage Insurance Premium (UFMIP)

This is a very important reminder that for any FHA Case Numbers assigned on or after Monday, April 5, 2010 the cost of UFMIP is going to increase from 1.75% of the loan amount to 2.25%. This is important as it is going to be more expensive to obtain an FHA loan. The increase will add $1,000 to the cost of getting a $200,000 FHA loan. A Case Number can only be obtained for a borrower who has applied for a loan and has an accepted purchase contract. Also, it can take up to 3 days to get a Case Number from FHA so to ensure the case number is assigned prior to the cutoff date it would be wise to request the Case Number as early as possible prior to Friday. FHA has proposed a number of upcoming changes which you can read about in my previous post.

Upfront Mortgage Insurance Premiums (UFMIP) are collected by HUD to cover the losses on FHA loans that go into default. Due to higher default rates in recent years FHA has been forced to increase the UFMIP premium to ensure the health and viability of the FHA loan program.

It is important that home buyers who are considering using an FHA loan be made aware of this change so that it does not come as a surprise to them late in the home buying process!