A few weeks ago I told you if you wanted to get a Federal Housing Administration mortgage, you should get moving to avoid higher mortgage fees. I hope you didn’t ignore my advice, but if you did, here goes your second chance to save money.
The FHA says that on April 1, it will increase its annual mortgage insurance premium from 1.15 percent to 1.25 percent. This insurance premium is usually broken down into monthly payments that are added to your mortgage payments. The FHA will also increase its upfront mortgage insurance premium by three-quarters of a percentage point to 1.75 percent of your loan amount. This is a one-time fee you can pay when you close, or choose to have it added the total of your loan.
Yes, too many numbers. But this is what it means to your pocket:
- If you borrow $200,000 before the increase: You'll pay $2,000 in the upfront fee (or you can add that to the total of the loan) plus about $191 per month for the annual premium.
- If you borrow $200,000 after April 1: You'll pay $3,500 in the upfront fee (or add that to the total of the loan) plus $208 per month for the annual premium.
Under this scenario, if you listen to me, you will save about $1,700 on the first year of the mortgage.
For those who live in high-cost areas and are considering getting a new FHA mortgage or refinancing into an FHA loan, there's more bad news.
On June 1, the FHA will increase the annual insurance for loans greater than $625,500 by another 0.25 percent to 1.5 percent.
For a borrower taking out $729,750, which is the FHA limit for high-cost areas, the increase may significantly affect a borrower's ability to get a mortgage considering the borrower would have to pay about $912 in mortgage insurance alone.
Now here is the Department of Housing and Urban Development's version of how the FHA increase will affect borrowers:
"FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month. These marginal increases are affordable for nearly all homebuyers who would qualify for a new mortgage loan," according to a statement released by HUD.
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