FHA Increases Upfront Mortgage Insurance Premium for Buyers
Feb 11th, 2010 @ 3:48 PM by Jenny Zhang
If you’re looking for a house, and thinking about getting an FHA loan, you might want to apply before April 5, 2010. That’s the date the FHA is raising its upfront mortgage insurance premium (UFMIP) on all FHA loans and your FHA case number will have to be assigned before that date in order to qualify at today’s lower UFMIP rates.
Actually, you’ll need to get in touch with a lender a few days before April 5th, as you’ll need an FHA case number assigned and that can take several days, depending on your lender.
What is an FHA Loan?
Here’s a little refresher on FHA loans: Insured by the Federal Housing Administration, FHA loans are popular for their flexible credit requirements and low down payment of only 3.5%. In fact, they’ve enjoyed a surge in popularity in the past few years, with the demise of most sub-prime and Alt-A mortgages. The return to plain vanilla mortgages has brought FHA loans from about 1% of the market four years ago, to as much as 30% of all closed loans today.
But there is a catch to FHA loans. They can be (and usually are) more expensive than conventional loans. There are extra fees and inspections with FHA loans, including UFMIP, a premium due upfront at closing. It can either be brought to the closing and paid or rolled into the loan, which is the most popular route. This upfront cost, or the UFMIP, is the insurance premium being increased.
FHA Upfront Mortgage Insurance Premium is Going Up
So, now let’s talk about UFMIP. It’s on the rise, and that will cost you. In a nutshell, beginning April 5th 2010, FHA has announced an increase to their UFMIP from the current 1.75% to 2.25%. This
Jenny Zhang is an experienced personal finance writer with a knack for taking complex money issues and making them clear and simple. By day, she's a home loan expert at Quicken Loans, America's #1 online lender, where she specializes in writing about home buying, refinancing and mortgage rates.