As of January 21, 2010, the FHA is changing their upfront funding fee from 1.75% to 2.25%. This is the fee the borrower can finance directly into their loan without making any changes to the purchase price. It doesn't affect the amount of cash required to close a loan and it won't change borrowers' mortgage payments very much but the change is getting a lot of attention nonetheless. Here's what's really going on:

The FHA is essentially going back to what it used to charge consumers years ago before it lowered its fee from 2.25% to 1.5%, and then increased it to the current 1.75%.

 So while this is definitely an increase, it's not really that big of a deal. Also, it won't impact very many borrowers because few lenders are doing loans with credit scores under 620. For FHA loans with credit scores under 580, however, the change is going to be pretty dramatic. Such borrowers will have to put down funds of 10%

Check out the wording of the mortgagee letter just released from the U.S. Department of Housing and Urban Development for yourself. It's aptly entitled "Increase in Upfront Premiums for FHA Mortgage Insurance"

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Posted by Jolenta Averill on
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They have to do something to raise money. I'm sure we'll see interest rates go up as well.

Posted by Charles on Wednesday, January 27th, 2010 at 2:14am

Mortgage availability in Spain is a real issue right now. Spanish Banks have become really cautious. This is holding our market back as a substantial proportion of our sales are now cash purchasers. We welcome these clients of course but the market would be much stronger if the banks weren't so nervous

Posted by Moraira Property on Thursday, February 4th, 2010 at 2:59pm

I don't think these changes are going to have a huge impact on the housing market, as long as FHA doesn't keep adding more to the table. With FHA being the only way most buyers can buy a home today, these small adjustments are better then the alternative for borrowers.

Posted by Lisa In Logan on Monday, February 8th, 2010 at 12:51pm

I don't think the change will have much of an impact either. The MIP can be financed into the mortgage loan. If out of pocket costs, like a larger downpayment, is required, then this may cause a buyer to hesitate.

Posted by Wisconsin Home Loans on Wednesday, March 10th, 2010 at 3:29pm

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Posted by Bank loan review on Saturday, July 31st, 2010 at 5:00am

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