FHA has just announced that their upfront and monthly premiums will be going up again. And for loans with less that 10% down, the borrower will have to pay mortgage insurance for the life of the loan. FHA is a great product for buyers who don’t have a large down payment and/or don’t have strong credit. BUT, buyers will be forced to pay a huge premium every month in return for the low down payment. It looks like FHA wants to get out of the loan business.
The HousingWire reported at the end of last week that FHA has decided to rescind their highly controversial Credit Dispute Rule. This rule would have made getting a FHA loan much more difficult. The guideline would have required borrowers who wanted to qualify for a FHA-insured mortgage to pay off any credit dispute in their history of more than $1,000 or set up a documented payment plan on any unpaid collection accounts. This rule would have had a critical impact on the real estate market, greatly impacting first time home buyers and builders. This illustrates the tug-of-war struggle between protecting the insurance fund and keeping mortage credit available.
The upfront insurance premium charged on FHA-insured mortgages for home purchases will increase from 1 percent to 1.75 percent on April 9, and the annual FHA mortgage insurance premiums will rise by one-tenth of a percentage point.