FHA loan cost is going up

FHA loan cost is going up on Sept 7th, 2010, unless you have an accepted contract by this date and your lender has a case number. (Case numbers can only be obtained if there is an address.)
Monthly mortgage insurance will increase from .50% to .90% for loans over 15 year term. (Despite the new ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.)
In everyday terms, assuming a $200,000 mortgage, the math to a homeowner looks as follows:
* Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
* Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
* Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium
The news is not all terrible, however.
FHA has also said it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent.
On the same $200,000 mortgage, that would reduces closing costs by $2,500.
However, the potential for reduced seller paid closing costs from a maximum of 6% down to 3% will mean higher entry cost and higher monthly payments for minimum down buyers.
The California Tax Credit Application Deadline is August 15,2010. Funds are limited, and not all applicants will be accepted.
All in all, several compelling reasons for minimum down homebuyers to get into contract now!

As FHA tightens requirements, Private mortgage insurance companies return to market

Beginning this month, down payment requirements on FHA-insured loans have been increased. Although borrowers with credit scores of 580 or above will still be able to make the traditional 3.5% down payment, those with lower scores will need 10% down.

In addition, the upfront mortgage insurance premium has been raised from 1.75% to 2.25%. The premium can be financed as part of the mortgage.

FHA has asked Congress for authority to increase the maximum monthly insurance fee from the current 0.5% level. The agency is seeking permission to hike the monthly charge to 1.55%, but has said it needs to raise it to only 0.9% at this time.

FHA is reducing permissible seller concessions from 6% of the loan amount to 3%. This change conforms to industry standards, and means that even if a seller were to agree to pay all of the borrower's closing costs, the borrower could count only that portion equal to up to 3% of the loan amount as if it were his own money.

Meanwhile, several private mortgage insurers have returned to backing 5% down payment loans to borrowers anywhere in the country.

Today, while FHA loans are generally considered to be the less expensive alternative, that's not always the case. Savvy borrowers would be wise to consider both before jumping to a decision.

Generally, PMI pricing is more affordable for borrowers making a down payment of 10% or more.

Source: Lew Sichelman, United Feature Syndicate 4/25/2010

FHA Mortgage Insurance Premiums to increase April 2010

Up Front Mortgage Insurance Premium (UFMIP) will be increased form 1.75% to 2.25%. The change will occur April 5th, 2010. This applies to purchase money and refinance transactions.
The FHA will also request legislative authority to further increase the maximum annual MIP they can charge. If they are granted the authority, they will shift some of the raise from the up-front MIP to the annual MIP.