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FHA costs go up Monday

By Holden Lewis ·
Friday, April 15, 2011
Posted: 3 pm ET

It will cost more to get an FHA-insured loan, starting Monday. You have this weekend to apply for an FHA-insured mortgage and grab the lower premiums.

The Federal Housing Administration insures mortgages, and it has a two-part premium structure. There's an upfront premium, which is a percentage of the loan amount and is paid at closing; and there is the annual premium, which is added to the borrower's monthly payment.

Starting Monday, the annual premium goes up by a quarter of a percentage point for new loans. The rate increase affects people who apply for FHA loans on Monday or thereafter. If you already have an FHA loan, your premium will stay the same. If you have applied for an FHA-insured mortgage before Monday -- in other words, if your FHA case number is issued before April 18 -- you'll pay today's lower premium instead of the higher premium that kicks in Monday.

Premiums vary, depending on the size of the down payment and whether the borrower gets a 15-year loan or one for a longer term. With the most common FHA-insured loan, the borrower puts down 3.5 percent and gets a 30-year mortgage. The annual premium for such a borrower will be 1.1 percent beginning Monday, up from 0.85 percent.

For someone getting a $200,000 mortgage, it would cost $41.67 a month more to wait and apply for an FHA loan Monday than to apply for an FHA loan today or this weekend. That's 0.25 percent of $200,000, which equals $500 a year. Divided by 12 months, that's $41.67 a month.

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