Earlier this year — and for the first time in its history — the FHA changed its funding fees and mortgage insurance structure.
Effective October 1, 2008, it’s repealing those changes.
Partly to keep FHA home loans affordable, and partly to comply with new laws, the FHA is rolling back its up-front fees and ongoing mortgage insurance requirements and replacing them with new ones.
The new up-front FHA fees are as follows:
- 1.750% : All purchase and “standard” refinances
- 1.500% : All “streamline” refinances
- 3.000% : All FHASecure programs for delinquent mortgagors
These fees are paid as a one-time cost at closing, and are calculated by multiplying the loan size by the fee. A $200,000 FHA purchase, for example, now carries a $3,500 one-time charge.
Ongoing mortgage insurance requirements have changed, too. These changes are based on the loan type and the amount of equity in the home.
- 15-year fixed with 90% borrowed or less: 0.000% annually
- 15-year fixed with more than 90% borrowed: 0.250% annually
- 30-year fixed with 95% borrowed or less: 0.500% annually
- 30-year fixed with more than 95% borrowed: 0.550% annually
Mortgage insurance premiums are calculated by multiplying the initial loan size by the annual premium. The same $200,000 FHA purchase outlined above, using a 95% 30-year fixed mortgage, would require a monthly mortgage payment add-on of $83.33 until the loan is paid in full.
FHA-insured mortgages have grown in popularity this year because, while the guidelines of other mortgage products have tightened, FHA guidelines have remained relatively loose. FHA allows 3.500 percent downpayments on purchases, for example, and allows “cash out” refinances to 95 percent.
Fannie Mae and Freddie Mac do not.
September 29, 2008 at 1:30 pm
Here we go again, the goverment making people with GOOD Credit carry people with poor, or marginal credit. Isn’t this discrimination also!Why shouldn’t people with superior credit pay less for the insurance? When is Congress going to protect the people who do the right thing? When do we finally make people earn what they recieve? I agree we need afforable housing programs, but we need for people to be able to qualify to afford them, this is the problem were cleaning up now.
October 2, 2008 at 5:28 am
John,
On the contrary, I strongly disagree with your comment. I am a single female, age 38, living in San Francisco. I am graduate-degree educated, have held jobs of increasing responsibility at the same company for over 9 years, and I have near-perfect credit. However, because I live in the 2nd most expensive city in the nation and am still paying off ridiculous amounts of debt from grad school, I can only afford to put 7% down on a $650K home. The FHA loan program affords someone like me the opportunity to continue to live and work in the city in which I am employed. Without it, I am stuck paying rent for the next 3-4 years while I try to save up $130K in cash for a down-payment.
Get educated on your facts before you make broad-sweeping generalizations about “affordable housing” and “you people” who have to carry “we people” who don’t qualify for other loans.