Costs of FHA Loans Set to Rise in 2013

March 11, 2013

FHA loan costs rising in 2013Beginning April 1, the mortgage insurance premium will be rising by 0.1 percent to 1.35 percent for FHA loans. While some would-be homeowners would gloss over this small amount, is it the first part in a bigger problem; on June 3, the duration of the mortgage insurance will lengthen significantly, to the point where it will essentially double the amount of mortgage insurance premium paid over the life of the loan.

For example, on a home with a purchase price of $175,000 with a 3.5 percent down payment at 4 percent interest rate on 30 year term, the current total amount that would be charged on the loan under best case scenarios would be around $20,000; after the increase, it may be as much as $42,000. This is just an example, and you should be sure to speak to a loan officer to confirm just how much more you may be looking at paying over the life of a loan with these changes.

These additional costs mean that borrowers who may not be able to put down 10 or 20 percent of the home’s cost for a down payment on a conventional loan, will be straddled with a much heavier long-term burden for choosing the FHA 3.5 percent program, especially if they plan on staying in a home for more than 10 years. Homeowners can also use the FHA program to secure their home and then refinance before the 10 years are up to prevent paying the additional mortgage insurance premium costs, though that requires careful planning.

For more information on the impact of these changes on your Chicago real estate search, visit the Department of Housing and Urban Development website.

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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