The dreaded FHA changes to the annual MIP rate is here! Effective April 18th, the new FHA annual MIP rate is 1.15%, which brings a $20 per month increase vs the old premium. I think FHA and the consumer would have been better served by increasing the upfront premium and leaving the annual (which actually felt monthly) premium the same or even lowering it.
The problem this brings to FHA is that slowly the cost advantage to a borrower with a high credit score and a low down payment has evaporated, and conventional financing has caught up. Now only borrowers with lower credit scores will end up choosing the FHA program, and that continues the long time issue of poor credit quality loans for FHA.
FHA needs to figure this out and make policy changes that encourage higher credit quality. Why not give the best borrowers an incentive to choose FHA?