The Federal Housing Administration (FHA) has announced that they are raising the cost of mortgage insurance starting April 9. This move is meant to increase the financial viability of the FHA mortgage program so that it does not need a government bailout as was required for Freddie Mac and Fannie Mae.

For consumers, it means that you have a window of opportunity in order to purchase or refinance using FHA financing under the old mortgage insurance structure. Your application must be in hand well before April 9 in order to beat the increase –however the transaction can close after that date.

How much is the increase? FHA has two types of insurance premium costs, up-front and monthly. The up-front premium is added to your loan amount and the monthly premium is added to your payment. As of April 9 the premiums will go up as follows:

•The up-front premium will move from 1.00% to 1.75%. If your mortgage amount is $200,000, this would be a one-time increase of $1,500.

•The monthly premium will increase from 0.10% to 0.35%, depending upon the loan size–with larger loan amounts increasing the extra .25% as of June 11.

You can see why we think it is advantageous for you to act quickly. For those purchasing, rates are at historic lows, home prices are the lowest in almost a decade and FHA allows a down payment of as little as 3.5% of the purchase price. For those refinancing, not only are rates low, but FHA also has a streamline alternative which allows a loan amount up to 125% of the current value of your home if it is currently financed with a FHA mortgage.

In short, this is a once in a generation opportunity and you must act quickly because we are expected to be very busy during the month of March.

Not sure if an FHA mortgage will benefit you?

Contact me for a free article: FHA Provides Alternatives.