Loan Modification

FHA insurance premiums to rise again ? better hurry!

By Gina Pogol

Wow, just when you thought the fees were set for the next few years….

FHA Commissioner David H. Stevens  announced a new premium structure for FHA-insured mortgages. Don’t expect it to save you money — the change means an increase of .25% to your annual mortgage insurance premium (MIP). This applies to all 30- and 15-year loans and it doesn’t matter if you put 80% down on your property purchase.  The upfront MIP will remain unchanged at 1% at least for now.  This premium change was spelled out in the President’s fiscal year 2012 budget and will affect new loans insured by FHA on or after April 18, 2011.  FHA Commissioner David H. Stevens explained,

“After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA?s capital reserves and help private capital return to the housing market. This quarter point increase in the annual MIP is a responsible step towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.”

This increase adds an average of $30 a month to what new FHA borrowers will pay.  While FHA doesn’t expect the change to impact home affordability for most borrowers, there’s no reason to pay it if you don’t have to. So those on the fence about refinancing or buying a home should get off fast. Unless they can’t find anything to do with an extra $360 per year.

Full post as published by FHA Mortgage Guide on February 16, 2011 (boomark / email).