FHA Mortgage Insurance (MMI)           

Beginning July 14, 2008 FHA will begin to use risked based pricing on all new origination of one to four unit single family mortgage with regards to the Mortgage Insurance Premiums.

In a not so similar fashion to conventional home loans, FHA insured mortgages require an upfront mortgage insurance premium regardless of the Loan to Value.  The mortgage insurance, referred to as mutual mortgage insurance (MMI), charges either 00%/.50%/.55% per year of the loan amount.  In addition to the mutual mortgage insurance that is charged to the home owner each month, FHA charges an upfront mortgage insurance premium (MIP) of 1.25% to 2.25% for 30 year fixed rate mortgages and 1.00% to 2.00% for 15 year mortgages.

 The premium grid is based solely on the prospective borrower’s credit bureau score and the loan-to-value ratio; both are defined below.   

Future Changes to the Risk-based Premium Schedule

 It is FHA’s intent to make any subsequent changes to the risk-based premium schedule only on an annual basis and make them effective at the beginning of the fiscal year.  FHA’s fiscal year begins October 1 and ends September 30.

Highlights Regarding FHA’s Risk-Based Premiums

·        UFMIP will range from 1.25 percent of the loan amount for lower-risk borrowers to 2.25 percent for riskier borrowers.

·        No borrower who qualifies for a FHA-insured mortgage will pay more than 2.25 percent on the upfront mortgage insurance premium (UFMIP) and 55 basis points for the annual premium.

·        Borrowers with credit bureau scores must be risk-classified by FHA’s TOTAL Mortgage Scorecard.

·        Those in risk categories without a premium shown are not eligible for FHA-insured mortgage financing.

·        Borrowers without credit bureau scores will need to be manually underwritten.  The mortgage insurance premium will be determined by the loan-to-value ratio for the non-traditional column in the premium schedule.  

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