In an effort to build their reserves and encourage private lenders to make their way back into the market, the FHA will raise two of their fees.
The Federal Housing Administration helps borrowers who might not qualify for conventional loans. FHA loans currently account for about 40% of new purchase mortgages, which is significantly higher than previous years.
The fees the FHA plans on raising are it’s annual insurance premium to 1.25 percent of the loan amount, up from 1.05, starting on April 1, and their upfront mortgage premium, which will also increase this year from 0.75 percent to 1.75 percent.
The program isn’t expected to decrease in popularity as it still is the only program with just 3.5 percent required for a down payment, although borrowers with higher credit scores might be more apt to go for a conventional loan where they can still get a much better deal.
First-time home buyers will be affected the most as they are often unable to come up with larger down payments necessary for standard mortgages and are then required to have mortgage insurance.