FHA Mortgage Insurance Premiums on the Rise (Again!)

FHA Mortgage Loans Get More Expensive in April

The Federal Housing Administration (FHA) is set to increase the mortgage insurance premiums again April 2013. I say again because this is the 4th such increase since 2009.

By law, the Federal Housing Administration must maintain a certain, minimum level of funds in the MMI Fund. That minimum is 2%, or $2 for every $100 insured. Today, the FHA has a negative $1.44 for every $100 insured.

That is a violation of Federal law, so they have to take corrective measures that will result in potential FHA buyers paying more.

The MI increase cuts into buying power, it increase monthly payments and it makes FHA a far less attractive option to potential homeowners.

Just how much will it cost you?

For potential home-buyers looking to borrow $250,000 on a 30 year fixed rate FHA mortgage their new mortgage insurance will be $3250 annual OR $270.83 every single month.

Wait, it gets better though! On June 3rd, 2013 your jacked up mortgage insurance premium on the loan above will NEVER go away unless you refinance.

That's right, in two short months FHA MI premiums are going to be for the LIFE of the loan. 

I'm save you from the math, but that is $97,500 in mortgage insurance over 30 years. 

Some of you lucky FHA borrowers will not have to face those lofty mortgage insurance premiums though. FHA Streamline refinance candidates whose loans were ENDORSED by FHA prior to May 2009 can still refinance under the prior MI schedule.

You can access HUD's Mortgagee Letter by clicking HERE

There are some low down payment mortgage products that allow for some creative mortgage insurance options, consult you mortgage lender before you take the FHA plunge. Never know, might be able to save yourself quite a few dollars.