Florida Connects – The Federal Housing administration has announced that the cost for FHA loan to be increased April 01, 2012. What will this mean for buyers in Florida who want to finance through FHA with a low down payment as low as 3.5%.
With the new premium structure going in effect their goal is to strengthen the Federal Housing and to achieve this FHA will increase there upfront and monthly premium insurance fees beginning April 01, 2012.
On June 01, 2012 there will be an additional increase of monthly mortgage insurance premium for high balance mortgages.
As of this time FHA loans require a upfront mortgage insurance, the amount is added to the loan amount, of 1%.
On April 01, 2012 the new upfront mortgage insurance will be increasing to 1.75%. This is an increase of 75% in upfront fees.
As example, on a loan amount of $100,000, the current upfront amount paid would be $1,000. After the increase goes into effect the new upfront amount equals to 1.75% and would be $1,750. This increase of $750 would be adding an additional $2.50 a month to the monthly mortgage payments.
Now don’t forget the monthly insurance premium will increase as well. Right now the insurance premium is 1.15% of the loan amount. On April 01st this will increase to 1.25%. On a $100,000 loan amount the monthly premium will increase from $115 to $125. Add the upfront fee of $2.50 a month it is an increase of $12.50 a month on your monthly payments on a $100,000 loan.
If you add this up over 30 years the same insurance premium will cost you an additional $4,500 as compared if you would have it acquired before April 01, 2012.
And than we have the FHA high balance loans, where the loan amount is greater than up to $625,500 and the maximum loan amount of $729,740 is included. On those mortgages effective June 01, 2012 the insurance premium will increase another 0.25% to 1.50%.
As an example on a $700,000 loan amount the current upfront insurance premium is $670. Effective April 1st the premium will increase from $670 to $729, an increase of $59.
The monthly premium increase takes effect June 01st will be $875 and is $205 more from what we are paying today.
If you are thinking about FHA financing and purchasing a home, I highly recommend that you take in consideration this premium increases and the cost of financing. You should take advantage of the current loan terms available today.