For the first time in its history, the FHA changed its funding fees and mortgage insurance structure this week.  FHA-insured home loans are now subject to a risk-based pricing adjustment, as shown by the table above. 

Because of risk-based pricing, FHA home loans are now more expensive for borrowers with less-than-ideal credit profiles, and less expensive borrowers with perfect ones.

Prior to the changes, most FHA borrowers paid an up-front fee of 1.500 percent, plus on-going annual mortgage insurance payments equal to one-half-percent on the amount borrowed.

FHA-insured mortgages have grown in popularity this year because, while the guidelines of other mortgage products have tightened, FHA program guidelines have remained loose.  FHA allows 3 percent downpayments on purchases, for example, and allows "cash out" refinances to 95 percent.

Fannie Mae and Freddie Mac do not.

For more information you can send us your questions to richardbaggett@absolutelowestrate.com or call us 337-494-5626