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Last year, the Federal Housing Authority made getting their low-cost mortgages even more expensive. Now, the FHA is increasing the cost yet again. April 18, 2011, the federal rate of interest on these insurance services will go up. Low-cost federal mortgages can be affected by this change. For some borrowers, this means a more expensive mortgage choice. Article source – Cost of FHA loans set to increase again by MoneyBlogNewz.

Helping out many with FHA loans

FHA home loans are a very specific subset of mortgages. Rather than directly providing bad credit personal loans not payday loans, the FHA insures mortgages from other loan providers. A huge down payment is not required with an FHA-insured loan. Typically the down payment, rather than the standard 10 percent requirement, just has to be between 3 and 6 percent. Any amount up to $729,750 for FHA mortgages could be taken out. Any borrower can become a homeowner if able to make mortgage payments, even if they cannot make a down payment.

FHA loan costs

Getting an FHA loan isn’t different from a regular mortgage loan for any borrower. Borrowers are required to pay mortgage loan insurance with FHA loans so that the federal government will repay the lender if something goes wrong. In previous years, a 0.5 percent premium was required for mortgage insurance. This was for all FHA loans. Last year, that amount went up to 0.9 percent. In April, the cost is going to raise another 0.25 percent, bringing the total to 1.15 percent of the total loan amount. For FHA borrowers, this essentially adds 1.15 percent to the mortgage rate of interest to be paid each month. When you have a $157,000 mortgage, this can be a fairly big increase. It means $400 a year additional.

FHA has good and bad about this

The FHA wrote mortgage insurance for the first quarter of 2011 for $72.1 billion in loans. The FHA wrote more refinancing loans since There are fewer loans than in previous years. The good news is that fewer FHA loans are currently entering default. The FHA has to raise rates to stay positive though, which is bad. For most borrowers, this is an indication the price of all mortgages will start going up. The federal government is still nervous about lending for mortgages in one way of interpreting this. Another way would suggest the economy is actually getting better. Either way, the boon of low rates of interest is sure to end soon.

Articles cited

Tampa Bay Times

tampabay.com/news/business/realestate/fha-raises-mortgage-fee/1159586

Total Mortgage

totalmortgage.com/blog/fha/fewer-fha-loans-going-bad/11172