FHA mortgages are the most common type of home loan in the country and they just announced a new increase to the costs of getting an FHA loan that will raise the insurance premium by another 0.1% on most new mortgages it insures. This is not good news for those wanting to buy a home as it will cost more money for the same home once the new changes go into effect. 

Add to that an additional change that will require the mortgage insurance to be charged FOREVER instead of allowing borrowers to cancel premium payments once their debt fell below 78% of the principal balance which has been their policy for many years. One exception to this will be for borrowers who put more than 10% down at the time of purchase.

Over the last two years FHA has already increased the costs of their loans several times; increased down payment minimums, increased mortgage insurance costs and minimum credit scores.  

These changes are an effort to reduce the agency’s exposure to risky loans and bolster its financial reserves, which have been depleted due to high delinquency rates from the mortgage crisis.

The exact date these new changes will take effect has not yet been released but they are coming and it will likely be in the next few months, just as the Spring buying season begins to bloom and home buyers are looking to make a new home purchase.  

It has been less than one year since their last increase when FHA increased both their monthly premiums and the upfront costs on mortgages. Hikes like these make it more expensive and therefore more difficult to buy a home — especially for first-time home buyers who normally don't have the cash to pay larger down payments.  First-time home buyers who do not qualify for low-down payment financing through the VA, or have the higher up-front costs and credit scores required by conventional lenders look to the FHA to finance their home purchase. 

Now more than ever it IS time to buy a home, the upfront costs continue to rise for FHA financing with all signs pointed to continued increases in all aspects of obtaining a home mortgage.