Prepare for FHA mortgages to get more expensive. If you already aren’t aware, the low upfront cost to obtain an FHA mortgage (currently 3.5% down payment) comes with the requirement that a borrower pay for mortgage insurance to cover FHA in case of default. The current Mortgage Insurance Premium, or M.I.P. , is .55% of the loan amount. As of September 7, 2010 any new FHA case numbers will be under new rules regarding mortgage insurance.
The Senate just approved a bill this week allowing FHA to increase the premium to 1.5% of the loan amount. However, it looks like FHA will be doing this in graduated amounts with the new percentage coming in at .85% or .9% depending on the size of the down payment. To offset the long term cost, they will be reducing the upfront cost, the premium you pay initially at the time the loan is taken out, from 2.25% to 1% of the loan amount.
Below is an example of what this will do to a customer’s monthly payment if they are not registered by September 6th, 2010.
I don’t know about you, but I could buy a week’s worth of groceries (ok maybe half a week) with $113/month.
