The annual mortgage insurance premium is due to increase on the 18th April, by 0.25%. For loans whose LTV (loan to value) is <= 95% the rate will increase from 0.85% to 1.10% and if the LTV is > 95% from 0.90% to 1.20% (assuming length of mortgage is more than 15 years).

For those of you that don’t know, mortgage insurance or PMI, is designed to protect the lender if the borrower does not repay the loan. It is required for all FHA loans, where the borrower makes less than a 20% down payment when the loan is taken out.

So what does this mean if you are buying a home? It means that your monthly repayment amount is going to increase. For example, if you have a mortgage for $157,259, your annual mortgage insurance premium will go from $118 to $151.

In order to ensure that you pay the old rate you will need to ensure that you have a case number assigned before the 18th April 2011.

You can read this post about Mortgage Insurance Increase and other posts on my real estate blog.

Impending changes by the FHA (Federal Housing Authority) and HUD (Housing and Urban Development) could cost you thousands extra if you wait rather than taking the plunge and buy now.

These changes which are due to take effect between the March 31st expiration of the Federal Reserve Board’s mortgage backed securities purchase program (this is one of the main reasons that loan rates have been kept artificially low) and the April 30th Home Buyer Tax Credit deadline, could hit you where it hurts, in your pocket.
The first of these changes impacts the cost of up-front mortgage insurance for FHA guaranteed loans. The current rate of 1.75%, is set to increase to 2.25%. This would mean that a borrower would pay an extra $965 on a $200,000 loan, assuming a down payment of $7,000. The mortgage insurance is usually added to the end loan amount, so the additional cost will be added to your monthly loan payment.

The other change will reduce the amount of seller concessions that can be returned to the buyer from the seller, from 6% to 3% of the purchase price. Seller concessions are generally used by buyers to pay their closing costs, a reduction in the amount that can be claimed, may mean that you the buyer will have to bring more of your own money to the table.

This and other articles are available on our Salt Lake Real Estate blog. If you are interested in purchasing a new home why not try our maps based Salt Lake MLS search.