Yesterday it was announced that FHA was making it more expensive to get an FHA loan - in the form of increased up front mortgage insurance premiums.
When you get an FHA loan, you are required to pay a one-time, up front mortgage insurance premium and all FHA borrowers are required to pay that amount. FHA doesn't actually lend you money, they only insure your loan - and to pay for that coverage, each person who gets an FHA loan is required to pay this insurance premium.
According to HUD's press release:
So for now, the up front mortgage insurance premium is going up 50 basis points - but FHA also asked for legislative authority to raise it even further in the future if needed.
- The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
- If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
- This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
- The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
It seems clear to that even more changes are coming to the FHA mortgage insurance programs - and one thing is apparent: it probably isn't going to get any cheaper to get an FHA loan anytime soon.
Because FHA is essentially an insurance fund - when funds are low, the best way to get funds back to where they need to be?
Raise the premiums.