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FHA mortgage insurance premiums approved to triple in 2010. Last week, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers.
Currently, monthly mortgage insurance premiums are 0.55% of the unpaid loan balance, divided by 12. The recently approved Federal Housing Administration Reform Act provides for an increase in monthly premium of up to 1.55 percent.
Despite the ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.
Assuming a $200,000 mortgage, the math to a homeowner looks as follows:
* Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
* Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
* Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium
A increase in monthly mortgage insurance premiums will reduce home affordability for buyers in Utah. If more of your monthly payment is going towards the mortgage insurance premium, then you have less money to pay towards the home mortgage.
The bill awaits companion legislation in Senate and final approval into law, but considering the House’s vote last week, it could happen rather quickly. If you’re planning to buy or refinance a home using an FHA mortgage, you may find that waiting to take the next step could reduce how much home you can afford to purchase.