On June 3rd, 2013, there will be a HUGE change to FHA loans. The Mortgage Insurance Premium (MIP) will become permanent for those that put less than 10% down. This will cost borrowers tens of thousands of dollars over the life of the loan.
Let’s say that you buy a home valued at $225,000. If you put 5% down, that would be $11,250. In addition to that, you’d pay an upfront fee of about 1.75% of the loan amount. The monthly MIP would be around $200/mo. Traditionally, as the loan balanced passed below 78% of the purchase price, the MIP would be removed from the loan payment. Depending on the down payment, this would happen around 5-10 years into the 30 year loan. By the time it’s all said and done, you might spend an extra $50,000 or more on MIP with the change. ($50k is based on 20 years at $200/mo.)
For files open PRIOR to June 3rd, they should be eligible for MIP expiration. If you are looking at a house, and about ready to pull the trigger, delaying could cost you upwards of $50k…
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