The big announcement regarding the FHA Mortgage is the Annual Fee cost decreased a half a point.
FHA has two types of PMI.
- The first type is upfront – that gets added to your loan balance – that is not changing.
- The second type is monthly – for which the appropriate mortgage term is called annual – which is changing.
I am going to discuss how the change affects the most popular FHA loan option – 30 year fixed with 3.5% down payment.
With a larger down payment or a shorter term the annual fee is less.
Prior to the announcement, the annual fee was 1.35% and will decrease to .85%. The fee is the percent of the total loan amount.
The way the annual fee is calculated on a monthly basis is you take the annual fee and divide by 12. On a 100,000 loan the monthly cost was 112.50. After the announcement, the cost is 70.83 – so you save about $42 dollars for every 100,000 borrowed.
Most importantly, before you get too excited, please remember the annual fee never goes away – even when you have 20%.
If you have any questions please call me directly 617 529 9317.