FHA, 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.