FHA Soon to Make Buyers Pay for Waiting

Delaying home purchase this year could cost home-buyers dearly. If you are considering buying a home this year, time is running out before FHA mortgage rules change for worse.

Federal Housing Authority (FHA) guaranteed loans are mortgages that offer a low down-payment of 3.5% at the current time, for buyers purchasing a primary residence for themselves. The looming changes to be implemented by the office of Housing and Urban Development (HUD) are going to affect the conditions of these loans quite significantly come April 5th 2010.

The mortgage insurance cost for FHA loans, required upfront, will increase from 1.75% to 2.25%. For example a borrower purchasing a $250,000 home with $8,750 down payment (3.5%), will see an increase of $1206 in loan insurance cost. Even though this amount is fed into the final loan amount, and the overall monthly payment increase is modest, it is still money coming out of the buyer’s pocket.

It is also important to remember the soon to come tax credit deadline of April 31st. In order to qualify for home-buyer’s $8,000 credit, the buyer would need to have the contract signed by that date, with a closing date no later than June 30th. Read detail here.