FHA Upfront Mortgage Insurance Going Up

fha-dollars1When someone applies for a Georgia FHA home loan, they will find out that there are two types of mortgage insurance associated with an FHA loan.  The first type is monthly mortgage insurance which is calculated at .55% of the base loan amount.  The second type of mortgage insurance is upfront mortgage insurance, which is currently 1.75% of the base loan amount.  FHA’s upfront mortgage insurance is typically financed into the loan or basically added to your base loan amount.  It was just announced that FHA’s upfront mortgage insurance is going up effective April 5, 2010.  It will be going up to 2.25%.  With the .5% increase on a $200,000 loan, this will cost you an additional $1,000 that will be added to your loan.  In the same $200,000 loan scenario, this will cost you over $5 additional on your payment per month.  With the current economy, every dollar counts, so if you are buying soon keep this in mind and get a contract before the end of March.

A few other possible changes to the FHA home loan may be coming as well.  Currently a seller can pay up to 6% of a buyers closing cost.  It is very likely that this will be reduced to 3%.  For smaller loan amounts this will mean more out of pocket expense for buyers.   The other change that is being talked about right now is changing the FHA requirement for down-payment.  It is currently 3.5% and soon may go to 5%.  This could eliminate a lot of potential buyers.

All this being said, lending guidelines are still getting tighter, so now is the time to buy before a new change effects your ability to get a loan.

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