The Federal Housing Administration (FHA) has decided to increase the mortgage insurance again!
Effective April 1st, the upfront mortgage insurance is going to go from 1% to 1.75% - that is usually added to your mortgage so it will increase your payments by roughly $5 a month. The other increase is in the monthly mortgage insurance. Right now it's 1.15% if you have a loan to value over 95% and 1.10% for those at or under 95%. That is going to increase by .10 basis points so for most borrowers, it will increase to 1.25%.
FHA has said they need to increase the Mutual Mortgage Insurance Fund by $1 billion and this is their way to do it.
Due to the increase, if you have the ability to put 5% down, conventional programs may be a better mortgage for you going forward. There are also some programs that allow for 3% down with conventional loans depending on income, credit and whether you are a first time homebuyer or not.
The other big change that is being discussed again is limiting the amount of seller paid closing costs to 3% of the sales price. Right now FHA allows 6%. There are some different ideas that are being discussed, one of them would limit it to the greater of 3% or $6000 to allow for lower sales prices to help cover the closing costs. There isn't a date set for that change yet, nor do we have anything official about it. The housing agency is taking comments on it for the next 30 days.
If you are buying a new home and using a FHA mortgage, you will want to try and get your FHA case number issued prior to April 1, 2012 to keep the current mortgage insurance rates!!
