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The Federal Housing Administration (FHA) has announced it is raising the cost of mortgage insurance starting April 1. This move is meant to increase the financial viability of the FHA mortgage program so that it does not need a government bailout, as was required for Freddie Mac and Fannie Mae.
Consumers will have a window of opportunity to purchase or refinance using FHA financing under the old mortgage insurance structure. Applications must be in hand well before April 1 in order to beat the increase however, transactions can close after that date.
How much is the increase? FHA has two types of insurance premium costs, up-front and monthly. The up-front premium is added to the loan amount, and the monthly premium is added to the payment. As of April 1, the premiums will go up as follows:
The up-front premium will move from 1 percent to 1.75 percent. For a mortgage amount of $100,000, this would be a one-time increase of $750.
The monthly premium will increase from .10 percent to .35 percent, depending upon the loan amount.
For those purchasing, rates are at historic lows, home prices are the lowest in almost a decade and FHA allows a down payment of as little as 3.5 percent of the purchase price. For those refinancing, not only are rates low, but FHA also has a streamlined alternative that allows a loan amount of up to 125 percent of the current value of a home if it is currently financed with an FHA mortgage.
In short, this is a once-in-a-generation opportunity and you must act quickly because we expect to be very busy during the month of March.
Not sure if an FHA mortgage will benefit you? Contact me for a free article: FHA Provides Alternatives
Information provided by Michael DeRosa, William Raveis Mortgage, LLC, MLO ID: 58223. 203-994-9988, 7 Trap Falls Road, Shelton, CT 06484
