FHA to Increase Mortgage Premiums for Real Estate in Chicago

chicago mortgage lender imageThe Federal Housing Administration (FHA) recently announced that it will soon be increasing its mortgage insurance premiums.
This news is especially important to first-time home buyers, since in 2012, about 78 percent of the FHA’s loans were issued to first-time homebuyers. Additionally, according to Realtor.com, four out of 10 first-time buyers purchased their home with a FHA mortgage.
Yearly mortgage insurance premiums will increase by 0.10 percent and will increase by 0.05 percent for loans higher than $625,500. The FHA is also tightening up their down payment requirements for loans greater than $625,500 as part of the new protocol. Instead of 3.5 percent down, borrowers will have to put 5 percent down.
Homeowners with FHA mortgages will no longer have the option to cancel premiums once more than 22 percent of a loan’s principal is repaid, and instead, will be required to pay premiums based on the unpaid balance for the remainder of their loans.
At the end of 2012, the FHA was left with a $16.3 billion deficit due to problems associated with mortgage loans issued between 2007 and 2009. The new guidelines are a cautionary measure to prevent even further losses.