The Federal Housing Administration’s controversial decision to increase premiums on federally insured mortgage loans could lead to some benefits for lower-income borrowers.
Effective April 1, insurance premiums on FHA loans will go up challenging borrowers and lenders to choose between federally insured loans and
The average FHA mortgage insurance payment will increase by approximately $13 a month, marking the third increase in two years.
And according to a Genworth U.S. Mortgage Insurance report, since these changes make federally insured loans at times
The impact of the FHA mortgage insurance premium increase is expected to affect buyer choices during the spring home buying season.
The report finds that “for nearly all borrowers who can make a downpayment that is higher than 3.5% on a loan up to $625,000, private mortgage insurance now is significantly less expensive than FHA.”
Considering that analysts predict refinance activity will wind down in the second half of 2013, when the implementation of higher FHA insurance pricing begins, the costs may “impact the recovering home purchase market.”
Options offered by Genworth appear to be more affordable. For example, a borrower with a 760 FICO score who puts at least 5% down on a $170,000, 30-year loan, would save at least $77 per month using Genworth over an FHA loan that would require nearly $3,000 more upfront.
