FHA Raising Fees in April

FHA GEARS UP TO RAISE FEES

FHA…What are you thinking?

As the housing market seems to be in a turnaround stage, the Federal Housing Authority (FHA) has decided enough is enough as it gears up to raise fees. Let’s start with the new fees.

Upfront fees or premiums will increase from 1% to 1.7% starting with all new loans assigned a case number after April 9, 2012, AND depending on Loan to Value (LTV) and term of the loan, higher monthly Mortgage Insurance (MI) fees will also apply.

So why is FHA doing this? FHA has become the new “sub-prime” outlet, allowing borrowers with lower credit scores and/or lower down payments the opportunity to finance a property as their primary residence. FHA is now financing nearly 40% of all new home purchases.

These lower financing guidelines have led to a higher default rate on mortgages which have put a strain on the capital reserves FHA is required to maintain.

So the President and Congress told FHA ‘Get it together!’ and lower their default rates and increase their capital reserves.  With the increase in fees FHA is hoping to re-build their reserves.

By maintaining lower credit score and down payment minimums, many borrowers will still have no choice available other than FHA financing.

What does this mean to you??

If you are a BUYER… find a property, get a signed contract and get your FHA case # assigned before April 9, 2012 to avoid the higher fees

If you are a REALTOR… inform your FHA buyers about the new fees, and how it is possible they may not qualify for an FHA mortgage under the new fee structure. So get that signed contract now!

If you are thinking of Refinancing … These new fees will also apply to refinanced loans with FHA Case numbers assigned April 9 and beyond. Get your FHA refinance started now!