Are FHA Mortgage Insurance Premiums Going Up?

Recently, we wrote about using FHA to purchase a short sale – meaning you can work with a home buyer to buy your home on a short sale. Visit: Buying a Short Sale Home Using An FHA Home Loan Just Got Tougher.

In review, here are the three major changes FHA announced regarding FHA home purchase loans that will be effective starting April 5, 2010:

  1. Upfront mortgage insurance premiums increase from 1.75% to 2.25%
  2. Allowable seller concession reduced from 6% to 3%
  3. FICO scores of 580 or lower are subject to a minimum 10% downpayment

What we didn’t cover in this article was the request FHA made of Congress to let FHA raise monthly mortgage insurance premiums and to lower upfront mortgage insurance premiums.

These changes are outlined in the FHA official statement, the conflicting request that FHA made is found nestled in a 1-paragraph notation on page 348 of the Budget of the United States Government, Fiscal Year 2011, in a section titled Special Topics.

  1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
  2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approves it, that doesn’t mean that FHA has to stand by its initial projections.

Truth is, about the only thing we know about the future of FHA lending is that, come April 5, 2010, borrowing money is going to be tougher, and more expensive. These are the facts as we know them today.

Homebuyers should plan accordingly.

Contact one of our Phoenix Real Estate Agents.