FHA set to raise premiums on mortgage insurance

The Federal Housing Administration (FHA) announced on Wednesday, Jan 30th that premiums on most of the new mortgages it insures will be raised by 10 basis points, or 0.1%. The FHA is the largest insurer of low down payment mortgages and what this means to you as a buyer is if you opt for a 30-year fixed rate mortgage and put down 5% or more you will now pay an annual insurance premium rate of 1.3% of the outstanding balance instead of the 1.2% it is now. If you put less than 5% down you will pay 1.35%. Jumbo loan borrowers of loans amounting to $625,000 or more will be raised by 5 points, or 0.05% and the required minimum down payment will be raised from 3.5% to 5%.

The FHA also stated it will require most mortgage loans to continue to have the insurance for the full life of the loan, instead of the 2001 policy that allows a borrower to discontinue the mortgage insurance once 22% of the principal loan balance is paid. An exception to having the mortgage insurance is to put more than 10% down. These changes are designed to reduce the FHA’s exposure to risky loans and bring back its depleted financial reserves. The FHA has not said when they will implement these changes.


Source: http://money.cnn.com/2013/01/31/real_estate/fha-mortgage-premiums


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