Cost of FHA Loans to Increase

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HUD announced that the Upfront Mortgage Insurance Premium on FHA loans would increase effective April 1, 2012 by as much as .75% of the loan amount.  The UMIP is financed over the life of the loan.

HUD also stated that the annual MIP (Mortgage Insurance Premium) could also increase by 10 to 25 bps.    This would mean that most borrowers would see their yearly Mortgage Insurance Premium by about .15% of the loan amount.

The Government Agency is also considering reducing the amount a home seller can contribute to the buyers closing costs.  Currently FHA borrowers can receive up to 6% of the loan amount as a seller contribution towards closing costs.   HUD is considering reducing that to 3% or $6000 whichever is greater.

These changes reflect the increase in popularity of HUD backed FHA loans over the past few years and the increasing default rate on these loans.

About John Krystof

John Krystof writes about personal finance and money matters for He was born and educated in Central Europe, but presently resides in New York City.

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