Federally supported mortgages, last year, got more costly. April 18, 2011, the cost will increase again. This increase could make it even more difficult to get a mortgage in the tightening sector.
Where FHA loans go
There are home loans offered by the FHA. These are for specific home mortgage situations. The FHA does not give bad credit personal loans. Instead, it insures mortgages for other loan providers to lend. FHA-insured loans often require very little down payment – between 3 and 6 percent, instead of the standard mortgage down payment of 10 percent. FHA mortgages can be taken out for any amount up to $729,750. The intention is that borrowers who can make mortgage payments but have a tough time making a down payment can become homeowners.
FHA loan costs
For borrowers, getting a Federal Housing Administration loan isn’t significantly different than getting any other mortgage loan. 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. The amount went up 0.9 percent last year. In April, the cost is going to increase another 0.25 percent, bringing the total to 1.15 percent of the total loan amount. FHA borrowers have to pay 1.15 percent additional of the mortgage. This will be added to monthly payments. For a $157,000 mortgage, this increase will cost slightly less than $400 per year extra.
Good and bad of FHA
In the first quarter of 2011, the FHA wrote mortgage insurance for a portfolio of $72.1 billion worth of 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. The bad news is the lower number means the FHA has to raise rates to be able to remain solvent. The expense of mortgages will go up due to this. This might be an indication that the housing sector and the economy are recovering, or it could be an indication that the federal government is still nervous about the status of mortgage lending. Soon, the low interest rates are bound to end.
Articles cited
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
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