The 3.5% down payment on FHA loans could be more expensive for buyers than expected. Beginning April 1, 2013, the mortgage insurance premium will go up by .1% to 1.35% which may not even be noticeable to most would-be homeowners.
The staggering increase will occur on 6/3/2013 when FHA’s policy on the duration of the required mortgage insurance will be increased for the life of the mortgage. It basically doubles the amount of total MIP if the loan is paid to term.
Below is an example with a purchase price of $175,000 with 3.5% down payment at 4% mortgage rate on 30 year term.
Regarding the current MIP duration: When the unpaid balance reaches 78% LTV of original purchase, the MIP can be released. In any event though, the minimum time must be…