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FHA loans will cost more

By Polyana da Costa · Bankrate.com
Tuesday, February 14, 2012
Posted: 8 am ET

If you plan to get an FHA mortgage or want to refinance with an FHA loan, act quickly.

A few weeks ago, I told you that mortgages insured by the Federal Housing Administration would get more expensive this year because of recently approved legislation that calls for an increase on FHA's mortgage insurance premium. At the time, it wasn’t clear when FHA would implement the hike. Many in the mortgage industry expect the increase by no later than April.  But it may come before then and it won't come alone.

The FHA plans to announce another increase in its mortgage insurance premiums, in addition to the increase required by Congress.

Carol Galante, the FHA's acting commissioner, told the Wall Street Journal that the FHA plans to announce an increase this month.

Brian Sullivan, a spokesman for the U.S. Department of Housing and Urban Development told me that "the recent premium increases required by Congress, as well as those FHA intends to announce, will be published in a mortgagee letter in the coming days."

The legislation requires the FHA to raise the mortgage insurance premium by 10 basis points, or one-tenth of 1 percent of the loan amount. That alone will translate into an additional $200 per year, or about $17 per month, for a borrower who takes out a $200,000 FHA mortgage. It remains to be seen how big the other increase will be. But if I were you I wouldn’t wait to see. If you need an FHA loan and can refinance now, don't waste time waiting. I mean, you can. But you'll end up paying more for your loan.

Follow me on Twitter@Polyanad

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