FHA to Raise Mortgage Insurance Rates in April, 2013

CaptureFHA, we used to love you.  You were a great program for first-time buyers and truly lived up to your creed to serve those that were less likely to obtain financing through other programs.  But it seems you’ve lost your way a bit.

In April, the cost of monthly mortgage insurance will increase again.  When I first started in the industry in 1991, mortgage insurance ran at a cost of $500 per year for each $100,000 borrowed.  As of April, the cost will now be $1,350 per year for every $100,000 borrowed.  That’s a whopping 170% increase.  In addition, most consumers won’t be able to drop the mortgage insurance no matter how much equity they have in the property.  For consumers with a down payment of 10% or more the insurance can be removed after 11 years.

FHA will continue to be a great source of financing for consumers; however, my advice to my customers will be to explore all other options first.


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