That Didn’t Take Long

February 15th, 2011 (02:29 pm)

Just months after FHA completely restructured their Mortgage Insurance fees, there will be another increase to the annual portion of the fees–which are paid monthly. Previously we saw the upfront fee reduced to 1.0% from 1.75% while the annual fee was increased from .55% to .90%, and now the annual fee will increase again to around 1.15%.

Here is an example of how it works with a $200,000 mortgage:

The upfront fee will remain $2000 (1%) which can be “financed”, or simply added to the loan balance. The annual fee will go up from $1800 per year to $2300 per year. The annual fee is paid monthly, so that makes the new monthly Mortgage Insurance fee $191.67 instead of $150.00.

This resulting increase in FHA fees could make conventional loans more competitive once these Mid-April FHA changes take effect. On the other hand, conventional loans secured by Fannie Mae and Freddie Mac will have their own fee increases about the same time. The main difference is that typically conventional loan fees are paid for through higher rates rather than higher Mortgage Insurance fees, so it will remain critical to carefully compare both the short- and long-term costs of all available options.

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