FHA Increases Fees for Borrowers

FHA Increases Fees for Borrowers

March 30, 2010

In less than a week, starting Monday, April 5, 2010 the Department of Housing and Urban Development (HUD) will increase fees for new FHA loans and reduce seller contributions. Getting an FHA loan just got more expensive a little harder.

In new policies set forth earlier this year, HUD announced plans to raise the upfront mortgage insurance premium (MIP) from 1.75% to 2.25% for everyone, this represents over a 28% increase in the insurance premium cost to the homeowner. Additionally, HUD will reduce seller contributions by 50% from 6% to 3%. Increase costs, reduce help, sounds like a great recipe to increase homeownership.

There are still a few days left to avoid being subject to higher loan costs, make sure to have the FHA Case Number assigned prior to Monday, April 5, 2010. That means you’ll want to take a full mortgage application before the weekend so your lender can register your loan in time for the deadline.

But don’t leave your application to the last minute.

Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1. However, Southwest Funding will be open and underwriting files on Good Friday.

Also worth noting is that the FHA isn’t done with its changes.

In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums. The FHA’s formal request, in summary:

Raise monthly insurance premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approve it, the FHA reserves the right to change its projections. Either way, it means higher costs for consumers.

The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money is only becoming harder, and more costly.

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