Monday, April 5, 2010

New FHA Insurance Premiums Go Into Effect Today - April 5

The Federal Housing Administration has been under pressure to raise its capital reserves, which have been bleeding for the past three years.  One response is to raise the upfront mortgage premium.

With an FHA loan, buyers may have a low credit score, and often need to have only a 3.5% downpayment.  In the Charlottesville MSA, the loan limit is $437k. 
The WSJ reports on the insurance premiums:
FHA-backed loans will increase to 2.25% of the total loan amount...from 1.75%. That amounts to an additional $500 for every $100,000 in borrowing. On a $300,000 loan, a borrower will pay $6,750 upfront in insurance costs, compared to $5,250.... Those insurance premiums can be rolled into the new loan.
It's notable, but not odd, that the FHA is raising premiums shortly before the April 30 deadline for the Homebuyers Tax Credit.  There's some hope that there will be a lot of loans written in the next three weeks.  However, this activity could be derailed with rising mortgage rates.

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