Editor’s note: This story has been updated and corrected. FHA has pushed back the schedule for implementing changes to premium structuring from Sept. 7 to Oct. 4. Upfront premiums will be reduced to 1 percent, not 1.25 percent as stated in a previous version of this story.
Upfront premiums for FHA mortgage insurance will soon be dialed back from 2.25 percent to 1 percent, while annual premiums will nearly double, Federal Housing Commissioner David Stevens announced Thursday.
(Under the timetable originally announced by Stevens, the changes were to take effect Sept. 7. HUD has since pushed implementation back to Oct. 4 to give lenders more time to update their systems).
The changes follow Wednesday’s passage of legislation raising the statutory limit on annual premiums from 0.55 percent to 1.55 percent.
Stevens said the Federal Housing Administration won’t raise annual premiums to the statutory limit just yet. Instead, FHA will boost the current 0.5 percent annual premium for borrowers with loan-to-value ratios of up to 95 percent to 0.85 percent, and increase the 0.55 percent annual premium for borrowers with higher LTVs to 0.9 percent.
Under the current premium structure, borrowers taking out a $200,000 loan with a minimum 3.5 percent downpayment pay an upfront premium of about $4,500, plus $1,100 a year in annual premiums.
After Sept. 7, the upfront premiums of 1 percent on a $200,000 loan would equate to a smaller upfront payment of about $2,000, with a $700 increase in annual premiums to $1,800 a year, or an extra $58 a month.