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FHA To Raise Mortgage Interest Rates On October 4, 2010

By
Real Estate Agent with Future Home Realty

Did we catch your interest with that headline?

Well to be honest FHA is not raising the interest rates on their loans, however they might as well be.

On October 4, 2010 any new FHA case numbers will see a decrease in the upfront mortgage insurance premium, along with an increase in the Monthly Mortgage Insurance Premium.

Congress and the administration has said this will save home buyers money.

Let’s look at reality and see if this is true.

We are going to look at three FHA loan scenarios as the new law gives the power to raise the Monthly Mortgage Insurance as needed, up to a maximum level.

Our scenario will look at a $200,000 30 year fixed rate FHA mortgage with a 5% interest rate. We will look at one based on todays premiums, those taking effect on October 4, 2010 and the premiums that are approved for the future.

Today
Mortgage Amount with Upfront Mortgage Insurance Rolled In = $204,500
Monthly Payment without Monthly Mortgage Insurance = $1,098
Monthly Mortgage Insurance = $94
Monthly Mortgage Payment = $1,192

October 4, 2010
Mortgage Amount with Upfront Mortgage Insurance Rolled In = $202,000
Monthly Payment without Monthly Mortgage Insurance = $1,083
Monthly Mortgage Insurance = $152
Monthly Mortgage Payment = $1,235 or $43 more each month than today which is like raising the interest rate by 0.33%

Future
Mortgage Amount with Upfront Mortgage Insurance Rolled In = $202,000
Monthly Payment without Monthly Mortgage Insurance = $1,083
Monthly Mortgage Insurance = $261
Monthly Mortgage Payment = $1,344 or $152 more each month than today which is like raising the interest rate by 1.125%

So where are the benefits and savings for home buyers the administration and Congress have talked about? Likely they are just talking about the upfront mortgage insurance premium, though those savings are wiped out and then some with the higher monthly mortgage insurance premium.

For those thinking of buying a Tampa home, especially if you want the low down payments required by FHA, it may very well be worth getting your purchase done now before these new FHA changes take place on October 4, 2010. Between the record low mortgage rates, depressed home prices and the lower FHA payments you would receive only if you buy now, it could be a no brainer.

Comments (1)

Sample Sample
Gila, NM

Another swing and a miss when it comes to "fixing the housing market"- thanks for a run on the numbers

Sep 03, 2010 05:02 AM