FHA Loans to Cost More Starting April 1, 2012

 I want to alert you to an upcoming change in FHA mortgage insurance premiums that is going to affect all FHA transactions and will cost more. This increase will apply to all loans, regardless of the loans’ amortization term or LTV.

This week, FHA announced that it will increase the up-front mortgage insurance premiums on all FHA loans, from their current level of 1.0% to a new level of 1.75% of the base loan amount on loans with new case numbers starting April 1, 2012. 

FHA also announced an increase in the annual mortgage insurance premiums (paid monthly) by an additional .10% above current levels shown in its tiered LTV/amortization matrix also effective for case numbers after April 1, 2012.  On a standard 96.5% maximum LTV FHA loan (below $625,000) the annual mortgage insurance premium will be 1.25% of the base loan amount. Loans above $625,000 up to the maximum $729,750 limit will have annual premiums of 1.50% for case numbers on or after June 1, 2012.

FHA, with its flexible underwriting criteria, low down payment of 3 1/2 %, permissible gift of funds to cover the  borrower’s minimum cash requirement, and short three-year waiting period for obtaining a new FHA loan after foreclosure.

This is  still the loan of choice for many homebuyers and I will continue to recommend it especially for 1st time homebuyers who don’t have the traditional 20% as a downpayment.

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