Home buyers with mortgages backed by the Federal Housing Administration will soon see a rise in fees, the agency announced Monday.Â
FHA loans allow for smaller down payments, as low as 3.5 percent compared to traditional loans, and they often have less stringent credit requirements, which have made them soar in popularity in recent years. (The agency insures loans but doesnâ€™t issue them.) About 40 percent of all new mortgages for home purchases in 2010 were FHA-backed mortgages.Â
In particular, FHA will increase two fees that borrowers pay. Starting April 1, it will increase its annual mortgage insurance premium for loans under $625,500,Â bringing the total cost from 1.15 percent of the loan amount to 1.25 percent. Starting June 1, larger loan premiums will see an increase of 0.35 percent of a percentage point, bringing the total premium costs up to 1.5 percent of the loan amount.
FHA also announced it will raise a fee for the upfront mortgage premium by 0.75 of a percentage point, which will now total 1.75 percent of the loan amount.Â
For example, a borrower with a 3.5 percent down payment with a mortgage of $193,000 can expect to pay an upfront mortgage premium alone of $3,377, compared to the prior $1,930. That can be rolled into the mortgage.