RateAPY

FHA Loans Just Got More Expensive

Posted by: RateAPY Bank Rates News
April 5th, 2010

Up Front Mortgage Insurance Premium (UFMIP)

Effective today, April 5, 2010, the UFMIP on new FHA purchase and refinance home loans has increased from 1.750% to 2.250%. The .500% increase will mean that each $100,000 borrowed will be $500 more expensive to insure. The UFMIP on FHA loans is normally financed. Financing the increased insurance will mean monthly payments increase also.

The change was originally announced on January 21, 2010, in Mortgagee Letter 2010-02. After the FHA capital reserve account was audited, it was feared that the FHA might need a taxpayer bailout. The capital reserves were depleted by the housing crisis. Determined to avoid the worst case scenario, the FHA has opted to increase up front insurance premiums to begin rebuilding its capital reserves. At this time, there has been no change made to annual premiums.

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