FHA Mortgage Insurance Premiums Approved To Triple In Cost
Starting sometime later this year, the monthly cost to carry an FHA-insured mortgage is expected to rise.
In a near-unanimous vote, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers.
Currently, monthly mortgage insurance premiums are 0.55% of the unpaid loan balance, divided by 12. The recently approved Federal Housing Administration Reform Act provides for an increase in monthly premium of up to 1.55 percent, among other details of the bill.
Despite the ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.
In everyday terms, assuming a $200,000 mortgage, the math to a homeowner looks as follows:
- Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
- Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
- Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium
A increase in monthly mortgage insurance premiums will reduce home affordability for buyers in Chicago and strain household budgets.
The news isn’t all terrible, however.
Because higher monthly insurance premiums are expected to pad the FHA coffers sufficiently, the FHA has said it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent.
On the same $200,000 mortgage, a move like that would reduces closing costs by $2,500.
The bill awaits companion legislation in Senate and final approval into law, but considering the House’s lopsided vote Thursday, it could happen rather quickly. If you’re planning to buy or refinance a home using an FHA mortgage, you may find that waiting to take the next step could be a costly one, long-term.
The FHA insured close to a quarter of all mortgages made in the first three months of 2010.
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Brian Guzman celebrated the start of his 3rd year as a real estate consultant by joining @properties in the Spring of 2007. He holds previous experience with two real estate firms in the River North and Lincoln Park neighborhoods. He was a highly valuable member on a team that produced over $100 million in sales in 2006. Brian strives for unmatched service and complete satisfaction in every transaction that comes his way. Whether you are a buyer or seller, he has the knowledge, experience, and determination to surpass your expectations. Brian is loaded with the latest marketing materials, strategies, methods, and company support that will fulfill your real estate needs and goals. He believes there is no limit to the amount of service and representation he can provide.
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