Price of FHA loans set to boost again

Last year, the Federal Housing Authority made getting their low-cost mortgages even more expensive. April 18, 2011, the cost will increase again. Low-cost federal mortgages could be impacted by this change. For some borrowers, this means a more costly mortgage choice. Source for this article – Cost of FHA loans set to increase again by MoneyBlogNewz.

Getting an FHA loan

There are home loans offered by the Federal Housing Administration. These are for specific home mortgage situations. Instead of directly providing bad credit personal loans not payday loans, the FHA insures mortgages from other loan companies. A huge down payment isn't required with an FHA-insured loan. Usually the down payment, instead of the standard 10 percent requirement, just has to be between 3 and 6 percent. FHA mortgages can be taken out for any amount up to $729,750. There are many that want to own a home however can't make a down payment. Generally they can nevertheless make a mortgage payment though.

FHA loan costs

Getting a Federal Housing Administration loan isn't different from a regular mortgage loan for any borrower. Borrowers are required to pay mortgage loan insurance with FHA loans so that the federal government will repay the lender if something goes wrong. For many years, FHA loans required a 0.5 percent premium be paid as mortgage insurance. Last year, that amount went up to 0.9 percent. There was a rise of another 0.25 percent in April to a total of 1.15 percent. For FHA borrowers, this essentially adds 1.15 percent to the mortgage interest rate to be paid each month. For a $157,000 mortgage, this increase will cost slightly less than $400 per year extra.

The improving portfolio of the FHA

The FHA wrote mortgage insurance for the first quarter of 2011 for $72.1 billion in loans. This is fewer mortgages than in previous years, though the FHA also wrote more refinancing loans. The good news is that fewer FHA loans are currently entering default. There is also bad news. In order to stay solvent, the FHA will have to raise rates nevertheless. Borrowers should expect increase in mortgages. This will occur on average. This might be an indication the housing sector and the economy are recovering, or it might be an indication the federal government is nevertheless nervous about the status of mortgage lending. There won't be low interest rates for long though. They’ll likely end soon.

Citations

Tampa Bay Times

tampabay.com/news/business/realestate/fha-raises-mortgage-fee/1159586

Total Mortgage

totalmortgage.com/blog/fha/fewer-fha-loans-going-bad/11172