Tucson Arizona Mortgage & Real Estate Blog

In an unbelievably native attempt to prop up the FHA Mutual Mortgage Insurance Fund, effective September 7, 2010 the Up Front Mortgage Insurance Premium (UFMIP) is decreasing from 2.25% to 1.00% and the Monthly Mortgage Insurance Premium is increasing from .50%-.55% to .85%-.90%.

Click here to read the full “Special Addition” letter

Now I can’t begin to see things from there side, but here’s how I see it – the monthly cost of owning a home will increase;  here’s a typical example: Assuming a $125,000 purchase price using a 30-year fixed rate FHA loan at 4.50% under the CURRENT terms (3 1/2% down, 2.25% UFMIP, .55% MMI) the Principle, Interest and MMI portion of the payment will be $680.23. Under the NEW terms (1.0% UFMIP, .90% MMI) the same home will cost $707.77 – $27.54 per month MORE (an increase of 4% in payment).

While this may not be alot to most people, it may be the difference between loan approval and denial. Besides what does this do to help people BUY homes and “mop up” the excessive inventory? PLUS if less people can afford to purchase a home doesn’t that mean LESS moneywill go to into the FHA Mortgage Insurance Fund which defeats the whole purpose? This move is akin to raising taxes to help the economy. It doesn’t a genius to see that it doesn’t work in business world and so it probably won’t work in Real Estate world either.

Good work FHA!!! The addage “we’re with the government and we’re here to help” has never been more true…