The Federal Housing Administration, a U.S. agency, will raise the premiums in April that it charges borrowers. The premium raise will go from 1.0% to 1.75% on the upfront insurance premiums that borrowers must pay when they take out a loan backed by the agency.
Borrowers also pay annual insurance premiums when they take out loans backed by the agency, and those fees range from 1.1% to 1.15% of their loan amount. Congress last year raised those annual premiums by 0.1 percentage point. The FHA said on Monday it will implement both fee increases on April 1.
On a $300,000 loan, the new upfront premium works out to $5,250, up from $3,000. But because homebuyers are allowed to finance the upfront insurance premium into the balance of their mortgages, the sticker shock from the higher fees would be minimal, provided that borrowers can qualify for a slightly larger loan.
The FHA offers among the easiest lending terms available, with down payments of just 3.5%. It doesn’t make loans but insures lenders against losses on those that conform to its standards.
It has backed about one-third of home-purchase loans in recent years, and some economists say that without the FHA, some home buyers would have been unable to qualify for purchases, potentially putting greater pressure on fragile housing markets.
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