FHA Premium Rate Increase Makes PMI a Better Option for Many Borrowers

The Federal Housing Administration (FHA) implemented a 25 bps increase to its annual premium rates on April 18, resulting in a payment increase for FHA borrowers. With this change, RMIC (an iLoan preferred mortgage insurer) offers equal or lower monthly premium rates on all LTVs with no upfront premium.

RMIC Monthy PMI vs. FHA MIP · Lower Total MI Premiums
30-Year Fixed · Purchase1 Unit Primary Residence
Loan Amount £ $417,000
> 95% LTV · 35% Coverage 95% LTV · 30% Coverage
FICO 720+ FICO 700+
RMIC FHA RMIC FHA
Upfront 1.00% 1.00%
Year 1 1.15% 1.15% 0.94% 1.10%
Year 2 1.15% 1.15% 0.94% 1.10%
Year 3 1.15% 1.15% 0.94% 1.10%
Year 4 1.15% 1.15% 0.94% 1.10%
Year 5 1.15% 1.15% 0.94% 1.10%
Total Premium First 5 Years 5.75% 6.75% 4.70% 6.50%
Savings with RMIC 1.00% 1.80%
Savings with RMIC on $200,000 loan $2,000 $3,600

To run borrower payment scenarios, try RMIC’s MI vs. FHA Calculator.

While FHA has been the choice of many clients in the last few years, this rate increase and other recent FHA changes make this the ideal time to consider whether Private Mortgage Insurance (PMI) is a better option for high LTV borrowers. RMIC, via iLoan, offers several premium plan options that can provide a better alternative for many high LTV borrowers, especially those with good credit.

RMIC FHA
Offers a choice of single or monthly premium plans Requires both upfront and monthly MI premium payments
MI premiums are cancellable under the Homeowners Protection Act of 1998 and according to investor practices Upfront premium is nonrefundable unless the borrower refinances into a new FHA-insured loan, and monthly premium is required for at least 5 years
Lower rates for loans with lower LTVs Same premium rates for all loans ≤ 95% LTV
Maximum loan amount of $625,000 in most markets; at least $417,000 in all markets Loan limits as low as $271,050
Allows for a one time buyout of mortgage insurance so that no monthly mortgage insurance remains; click here for more No buyout available

Charles Dailey – Branch Manager, Loan Officer, Certified Military Housing Specialist – CA DOC, MN DOC & WI DFI

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href=”http://phone.charlesdailey.com” target=”_blank”>612.234.7283

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