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New FHA Mortgage Insurance Premium Rules Start October 4th

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New FHA Mortgage Insurance Premium Rules Start October 4th
30 September, 2010  |  No comments  |  credit news
Not sure if you heard, but starting Oct. 4, the upfront fee on FHA loans will fall to 1 percent of the loan amount from 2.25 percent. However, that savings will be offset by a raise in the annual fee to 0.90 percent, from 0.55 percent. Most homeowners roll both fees into their monthly payments. The combined effect of the fee changes will result in higher costs overall for most homeowners.

How it adds up:  Let’s say a home costs $200,000 and you take out a $193,000 loan. The current monthly FHA insurance premium of $88 a month would jump to $148 a month after October 4, 2010. That $60 difference translates to about $7,200 over 10 years. That would offset the savings of $2,400 on the upfront costs.
The main thing is that it costs a little more over the life of the loan and it decreases the costs on the front end to obtain the loan.

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