Tuesday, April 6, 2010

Mortgage Insurance Premiums Rise

Monday (April 5th) marked the increase of mortgage insurance premiums by the Federal Housing Administration. Mortgage insurance premiums on FHA-backed loans will rise to 2.25% of the loan amount from 1.75%. That amounts to an additional $500 for every $100,000 borrowed. On a $200,000 FHA loan, a borrower will now pay $4,500 upfront in insurance costs, compared to $3,500 before. However, these insurance premiums can be rolled into the new loan, just as before.

I see the point of the higher mortgage insurance because the FHA wants to boost reserves and to avoid a possible taxpayer bailout of the mortgage insurance agency. However, this along with other FHA changes this summer (ex. 50% reduction in the maximum amount of seller contributions toward buyer closing costs) and the $8,000 and $6,500 tax credits expiring soon, it’s an abrupt switch from being extremely buyer friendly one month to grandma smacking your hand with a spoon when you reach for seconds.

“Ah-ah-ah, Mr. America. We've stuffed you long enough. You’ve gotten too comfortable and fat. Now we have to limit you and teach you portion control.” With all this money being spent and used to bail out we’re going to be squeezed in the future like a stress reliever man until our eyes pop out. That money the government hands out comes from somewhere, they just want to redistribute it how they see fit.

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