FHA to Increase in Up-Front Mortgage Insurance - Again!

According to Bloomberg report, FHA is set to raise its mortgage insurance premiums again for the fourth time in 3 years.  Beginning April 1, the cost of up-front mortgage insurance premiums will increase by 75 basis points for new 30-year loans.  The change applies to new loans registered on, or after, April 1, 2012. “The  75 basis point increase will be in addition to a 35 basis point increase in the annual premium on loans up to $729,750 that was announced earlier last month as part of the agency’s 2013 budget”, said FHA Acting Commissioner Carol Galante. 

“For loans up to $625,000, the increase will be on top of a 10 basis point increase on annual premiums for smaller loans.   The increase will add about $5 per month to the cost of a typical FHA loan, which is about $150,000”, Galante said.

When buyers are approved for FHA loans, they are required to carry mortgage insurance.  That includes both a Mortgage Insurance Premium (MIP) and an Up Front Mortgage Insurance Premium payment into an escrow account set up by the US Treasury Department and the funds are used to protect the government in case the borrower defaults on the FHA loan.

Because the FHA backs many first-time and lower-income borrowers, the premium increases could have a negative effect on the housing market, particularly on homebuilders, according to Jaret Seiberg, senior policy analyst at Guggenheim Securities’ Washington Research Group.

“We believe this is a negative for housing as it will make it that much more expensive for first-time homebuyers to enter the market,” Seiberg said in a note to clients.

If you are planning to use FHA for your next home mortgage, get your loan application today.  If you wait, you’ll be subject to the FHA’S new premiums.  For a list of great deals in Alaska area, you may check out http://www.anchoragehomedeals.com/.