Mortgages Blog

Finance Blogs » Mortgages Blog » FHA fees on the rise again

FHA fees on the rise again

By Judy Martel ·
Wednesday, February 29, 2012
Posted: 2 pm ET

Beginning April 1, borrowers will pay more for upfront mortgage insurance from the Federal Housing Administration, or FHA. Fees were last raised in April 2011 and are at the highest in the FHA's history.

Premiums for the insurance will rise from 1 percent to 1.75 percent of the base loan. The FHA estimates the increase will cost new borrowers an average of $5 per month.

In addition to the upfront insurance, borrowers also pay annual premiums for FHA-backed loans. Those fees will also increase on April 1, by 0.1 percent for loans less than $625,500. An increase on the annual premium for loans above that amount, of 0.35 percent, will take effect June 1.

Congress has mandated that the FHA's insurance fund hold 2 percent in reserves and Acting Commissioner Carol Galante says this move will help restore the fund by adding more than $1billion through fiscal year 2013.

The FHA doesn't actually make loans, but backs loans with as little as a 3.5 percent down payment. Approximately a third of mortgages are backed by the FHA. Lacking additional funds, the FHA could run through its reserves this year, and no one wants to see another government bailout.

Keep up with your wealth and mortgages and follow me on Twitter.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.