New FHA Mortgage Insurance Premiums Increase April 2012

Yes it is true. The federal government Housing Administration is increasing the mortgage insurance on their FHA loans starting in April of this year. FHA charges a percentage of the loan amount as an insurance policy (so to speak) because of the low down payment that is required (3.5%) to acquire a mortgage on a house. The program is great and has helped many home buyers who otherwise would not be able to buy a home get it not a house. But, with the low down payment comes a higher risk and thus increased likelihood of default. The new guidelines which go into effect increase the amount they charge on loans beginning on April 9, 2012. The new rate will be 1.25% of the loan amount for loans with less than 5% down payment and 1.20% for loans with greater than 5% down payment. How does it affect you if you are looking for a house under the FHA guidelines? When I did the calculations for a $100,000 home under the current program and the new one the payment based on the same interest rate increased the payment $10.00 a month. So, in essence for every $100,000 you borrow you will be paying back an additional $10.00 a month. It may not seem like a lot but over the term of the loan it can add up...The benefit to this is that it is tax deductible. But it does not help you out every month just during tax time. You can avoid the increased premium by finding a house and locking an interest rate in prior to April 9, 2012. You do not have to close on the house by then; just have a rate lock and be under contract to close for a house by that date to save the money. Dave diCecco Realtor/Broker www.davedicecco.com