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For some would be home buyers, the FHA loan is the only option that these buyers have. The FHA claims that the new guidelines will only increase the total monthly mortgage payment by a few dollars, but any increase will surely eliminate a lot of new buyers from the market place. Not exactly a great move to stimulate the housing market.

The Federal Housing Administration will raise mortgage insurance premiums this April in order to repair the health of its emergency fund.

The FHA upfront mortgage insurance premium will increase to 1.75% from 1% of the base home loan amount. This will apply regardless of the term or loan-to-value ratio beginning in April.

The annual mortgage insurance premium will increase by 10 basis points for loans under the $625,500 limit beginning April 1 and by 35 bps for home loans above that amount starting in June, the FHA said Monday. Authority for these raises come under the payroll tax cut extension agreed to last fall.

The FHA said the changes will boost the Mutual Mortgage Insurance Fund by $1 billion.

The UFMIP can still be financed into the mortgage. The increase to the upfront premium will cost new borrowers roughly $5 more per month.

Reverse mortgages and borrowers in special loan programs would be exempt from the changes, according to the FHA.

Last week at the Mortgage Bankers Association servcing conference in Orlando, FHA Commissioner Carol Galante said there would be upcoming insurance premium changes for the streamline refinance program. An FHA spokesman said these changes would be included in a letter to lenders due soon.


The new changes don’t go into effect until April 1, so if you’re thinking about purchasing that new home, you might want to move a little quicker to some to save some money.


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