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Is It True That FHA Loan Costs Are Going Up Next Week?

Crofton Real Estate Q & A

Q.  Is it true that loan costs are going up?  If so, how much?

A.  April 18, 2011, is the effective date for another big increase in FHA loan costs.

Mortgage Application.jpgAccording to Maryland loan originator Alan Gross, the Annual Mortgage Insurance Premium will go up 25 basis points per year.  What will that mean to someone who procrastinated on buying?

Assuming they purchase a home for $250,000 with the minumum of 3.5% down required by FHA, their monthly payment will increase by $52.08.  That’s because they will have an FHA mortgage insurance premium of $239.59 per month instead of the $187.50 per month for loans placed before April 18.

For a 30–year loan, that adds up to nearly $21,000 extra in loan costs.

Down payment requirements and loan costs have been going up for all loans, in recent months, and this is something to take into account if you’re sitting on the fence deciding when is the “right” time to buy.  At some point, the option of buying may just disappear for you.  Not many people are in the position to make a 20% down payment –  a direction that many experts feel we’re headed. 

A tougher loan market impacts home sellers as well as buyers.  One thing is certain:  Borrowing costs aren’t likely to go down any time soon.  If buying or selling is in your plans for the near future, think about doing it this spring or summer. 

Next Week’s Q&A:  Should I sell to my tenants?

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