Conventional wisdom:
For most of your members, MGIC MI is the better choice over FHA
New FHA rates | Compare today | Compare with new FHA rates
New FHA rates
On Aug. 4, 2010, Congress passed H.R. 5981 and the President signed it on Aug. 11, 2010. It allows the FHA to increase its annual mortgage insurance premium to as much as 1.55%.
The FHA has announced its intention to:
- set the rate for 95% LTVs and under at 0.85% – up from 0.50%, a 70% increase; AND
- adjust its upfront premium to 1% from 2.25%.
Changes are scheduled to become effective Oct. 4, 2010, on all new FHA case numbers.
Compared with FHA financing today, conventional financing with MGIC Credit-Tiered MI is a better deal for your members, affording them:
- low monthly payments,
- lower MI costs,
- a lower loan amount, meaning greater home equity AND
- the chance to cancel sooner – MGIC MI allows borrowers to take advantage of any home improvements or appreciation, as most lenders allow a new appraisal to cancel MI. FHA does not.
When FHA's new rates go into effect, MGIC MI becomes an even better choice. See the example below.
MGIC rates vs. FHA rates today
Comparing current FHA rates with MGIC Credit-Tiered Monthly MI in the example* below, MGIC MI:
- saves members nearly $5,000 in MI costs over 3 years and
- places them in a stronger equity position from the start.
| 95% LTV | MGIC MI Advantages over FHA MI |
||
|---|---|---|---|
| Current FHA MI |
MGIC MI | ||
| Base Loan Amount | $237,500 | $237,500 | |
| Upfront Premium | $5,344 | $0 | · No upfront premium |
| Total Loan Amount | $242,844 | $237,500 | · Lower loan amount |
| P&I | $1,304 | $1,275 | · Lower monthly P&I |
| Monthly MI Payment | $98 | $107 | |
| Monthly Payment | $1,402 | $1,382 | · Lower monthly payment |
| 3-Year MI Costs | $8,828 | $3,848 | · Lower MI costs |
| Home Equity after 3 Years | $18,464 | $23,559 | · Greater equity |
Assumptions:
- Purchase price = $250,000; Term = 30 years; Interest rate = 5%; FICO = 740
- FHA upfront premium = 2.25%, financed into the loan amount
- Premium rates: FHA MI = 0.50%; MGIC MI = 0.54%
- Monthly mortgage payment includes P&I plus MI premium
- All other closing costs are equal.
- 0% home appreciation
Note: FHA declining renewal premiums were applied. Also, for the purpose of example, numbers and calculations were rounded to the nearest dollar and may vary slightly from actual results.
MGIC rates vs. new FHA rates
Comparing FHA's new rates with MGIC Credit-Tiered Monthly MI in the example* below, MGIC MI:
- reduces members' monthly mortgage payment – $73 lower from the start,
- saves them more than $4,400 in MI costs over 3 years AND
- places them in a stronger equity position from the start.
| 95% LTV | MGIC MI Advantages over FHA MI |
||
|---|---|---|---|
| New FHA MI |
MGIC MI | ||
| Base Loan Amount | $237,500 | $237,500 | |
| Upfront Premium | $2,375 | $0 | · No upfront premium |
| Total Loan Amount | $239,875 | $237,500 | · Lower loan amount |
| P&I | $1,288 | $1,275 | |
| Monthly MI Payment | $167 | $107 | |
| Monthly Mortgage Payment | $1,455 | $1,382 | · Lower monthly mortgage payment |
| 3-Year MI Costs | $8,298 | $3,848 | · Lower MI costs |
| Home Equity after 3 Years | $21,295 | $23,559 | · Greater equity |
Assumptions:
- Purchase price = $250,000; Term = 30 years; Interest rate = 5%; FICO = 740
- FHA upfront premium = 1%, financed into the loan amount
- Premium rates: FHA MI = 0.85%; MGIC MI = 0.54%
- Monthly mortgage payment includes P&I plus MI premium
- All other closing costs are equal
- 0% home appreciation
Note: FHA declining renewal premiums were applied. Also, for the purpose of example, numbers and calculations were rounded to the nearest dollar and may vary slightly from actual results.
*These comparison examples are for illustrative purposes only. They do not in any way guarantee specific premium rates or approval by MGIC of any loan for insurance. MGIC's mortgage insurance premium rates are subject to availability in each state, individual state laws and licensing requirements.
For more information
Contact your MGIC Account Manager.