If you’ve been considering mortgage refinancing with an FHA home loan or streamline refinance you should know that effective April 1st, the FHA is raising its mortgage insurance premiums. All FHA mortgage applications including streamline refinance will have to pay higher fees. If you’re planning on taking out a mortgage backed by the FHA you need to get moving today; if you wait past April you’re going to get more expensive. Here’s what you need to know about upcoming changes at the FHA.
FHA Mortgage Insurance Premiums
The announcement by the FHA came February 27th; however it hasn’t been made official until the mortgagee letter is released.
If you’re not already familiar with the FHA, you should know that the Federal Housing Administration doesn’t actually make loans, they only insure them. If you purchased your home or refinance with an FHA backed home loan, what you’ve got the typically lender like Amerisave or USAA Mortgage Rates just like a conventional mortgage; however, the FHA insures your home loan against default. This means less risk for the lender allowing homeowners approval that might not otherwise qualify.
The FHA charges you for insuring your home in the form of mortgage insurance premiums. When you buy car insurance, the poorer your driving record, the more you’ll pay. The same is true with FHA mortgage insurance; the poorer your credit history, the more you pay.
Mortgage Insurance Premiums Going Up April 1st
According to the announcement, the FHA has determined that mortgage insurance premiums are too low to cover anticipated losses. This is the fourth time the FHA has raised insurance rates in three years. The increase affects all FHA loans registered after March 31st, 2012.
If you want to avoid this latest increase in mortgage insurance premiums you need to act now. Unlike the previous three increases, this one is significant. The upfront part you’ll pay is going from one 1% to 1.75% of your loan amount. You don’t have to fork over the cash for your upfront premium at closing; the amount is added to your loan amount meaning you’ll pay interest on it for the duration of your mortgage term.
The annual insurance premium is seeing less of an increase, going up just ten basis points for 2012. Another announcement for FHA streamline refinance is expected in the coming weeks. It is rumored that mortgage insurance premiums will actually be going down if you’ve had your FHA home loan since June 1st of 2009. Nothing from the FHA’s announcement about mortgage insurance premiums is cut in stone yet and subject to change before the official announcement is made.