Congress voted at the end of December 2011 to extend the payroll tax deduction discount which is part of the "Tax Relief, Unemployment Insurance Re-authorization and Job Creation Act of 2010". This move continues the 2% cut for two more months by extending the act through the end of February of 2012.
In order to pay for the $33 billion cost of this program Congress is requiring Freddie Mac, Fannie Mae and the FHA to increase their loan fees, essentially leaving newly to be home-owners to foot the bill.
Borrowers will have to pay now rates that are about .375% to .5% higher for conventional mortgages and also higher mortgage insurance premiums on FHA loans beginning April 1st of this year. This means that on, for example, a $200,000 conventional mortgage you will need to pay $750 to $1,000 in additional fees to buy the rate down to the interest rate you would have received before this program was extended. If you do not buy it down you'll have to pay tens of thousands in additional interest over the life of a 30 year conventional mortgage. This applies to all conventional mortgage products from any bank or lender.
Many lenders are already beginning to implement this rate increase with their rate locks. So, if you are currently floating your interest rate on a purchase or considering a refinance, lock in your rate now to possibly avoid this hike.
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