FHA Loans Get More Expensive

If you are looking to buy a home with an FHA mortgage then things are about to get more expensive. The Federal Housing Administration will increase two fees starting with the mortgage insurance premium for loans under $625,500 which will increase from 1.15% to 1.25% starting at the beginning of April. In June larger loans will increase 0.35% to 1.5%.

The FHA will also raise fees for the upfront mortgage premium by 0.75%, to a total amount of 1.75% of the loan amount.

So what does this mean? Consider a home buyer who wants to take out a loan for $200,000, with a 3.5% down payment. After the down payment the loan amount would be for $193,000. The FHA upfront fee will increase from $1,930 to $3,377, which is usually wrapped into the total loan amount. In total, the increases would mean an extra $25 per month.

Also note that these fees also apply to people wanting to refinance.

The FHA is increasing these premiums for a couple of reasons. First of all they need the money to recover their depleted reserves. FHA mortgages have become more popular in recent years because they require a smaller down payment and a lower credit score. These rate increases are designed to make FHA loans less attractive, and make conventional loans more attractive (at least to those who qualify).

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