The Federal Housing Administration (FHA) will be implementing its new mortgage insurance premium structure on October 4, 2010.
Congress recently passed a bill that allows FHA to increase the annual premium to 0.85% for loans up to and including 95% of the sales price or value. The annual premium for loans greater than 95% of the sales price or value will be 0.90%. The previous statutory limit was 0.55% with less than a 5% down payment and 0.50% with a 5% or more down payment.
Under this new bill, FHA will lower its financed, up-front mortgage insurance from 2.25% to 1.00%. This change will help FHA to build up its cash reserves, which are currently lower than needed.
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