FHA Fee Increases and Decreases
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In the current economic climate, every dollar saved helps. Though new homeowners will pay more for their upfront insurance premiums, existing homeowners can save thousands by refinancing.
The Federal Housing Administration (FHA) is increasing their upfront insurance premium from 1 percent to 1.75 percent. FHA's annual mortgage insurance premium will increase by 0.10 percent for loans under $625,500 and by 0.35 percent for jumbo loans over $625,500. Anyone who rolls the upfront charge into their mortgage should expect higher mortgage payments. For a $200,000, 30-year FHA mortgage, the change to the upfront insurance premium will increase monthly payments by $24. Although this is the fourth fee increase in the past three years, FHA believes the change is necessary. The added revenue will boost the Mutual Mortgage Insurance Fund by $1 billion through 2013, ensuring FHA's stability in a volatile market.
Changes to FHA's Streamline Refinance Program could save homeowners thousands. FHA will cut its upfront fees for refinancing loans, letting homeowners take advantage of low interest rates without losing thousands of dollars in fees in the process. Starting June 11, borrowers who obtained their FHA-backed mortgages before June 1, 2009 will pay an upfront fee of just 0.01 percent. For the 3.4 million households who currently pay more than 5 percent in annual interest, refinancing can save an average of $3000 a year or $250 a month. This is a huge benefit to homeowners who owe more on their mortgages than their homes are worth. A $250 drop on their monthly mortgage bill could stave off foreclosure and give them more money for everyday expenses.
A streamline refinance is automatic for borrowers who are current on their mortgage payments but only when a homeowner benefits from the process—for instance, when low interest rates will save the homeowner thousands of dollars over the life of the mortgage. Fortunately, mortgage rates are reaching historic lows. For the week ending April 12, 2012, the 30-year fixed-rate mortgage averaged 3.88 percent, significantly lower than the same week in 2011, when it averaged 4.91 percent. The 15-year FRM also reached a record low; it averaged 3.11 percent, compared to 4.13 percent during the same time last year.
