Buying a Home with FHA Financing?

FHA Raising PMI Insurance Rates in April

In an effort to shore up finances due to foreclosures, the Department of Housing and Urban Development (HUD) is raising the cost of an FHA mortgage on all FHA mortgages initiated after mid April.B The increase in payment on a typical FHA 30 year fixed rate loan is below:
Purchase PriceB B B B B B B B B B B B B B B B B B B B B Payment Increase

  • B $200,000.00B B B B B B B B B B B B B B B B B B B B B $40.61
  • B $250,000.00B B B B B B B B B B B B B B B B B B B B B $50.76
  • B $300,000.00B B B B B B B B B B B B B B B B B B B B B $60.92

The Impact of Rising Interest Rates
If you have been watching mortgage rates you know that rates today are between 0.5% and 0.75% higher than they were last November. While they are bit lower this week than they were a couple weeks ago, this may be short lived.B The recent dip in rates has been driven largely by the turmoil in the Middle East.B This can change quickly. If investors start to feel more comfortable with the situation in the Middle East we could see a return to the upward trend in mortgage rates that we have experienced for most of the past 3 months.
Virtually all of the analysts that I follow agree that interest rates are now in an upward trend and could be significantly higher soon*.B This is largely due to slight improvements in our economy and the ballooning federal debt.B Whether rates start upward again in a week or in a few months, it is clear that if we wait long to buy a home, we will probably have a higher mortgage rate.
To illustrate the impact of rising interest rates: a $200,000 loan at 4.75% has a payment of $1043.29.B At 5.75% the same loan has a payment of $1167.15.B That is a payment increase of over 11%.B For many of us that can put the home we want out of reach.
While this payment increase may be partially offset if home prices decrease by 2% or 3% over the next year, I donbt know of anyone who is projecting home prices to fall by 11% in our market.*B If you couple this with the increase in FHA mortgage insurance rates in mid April, I think it paints a pretty compelling picture to buy a home before interest rates rise and mortgage insurance rates increase.
*This is an opinion.B No one knows what will happen to interest rates or home prices in the future.B While we believe this information to be insightful, it is not guaranteed in any way.B Anyone financing a home should do their own research and come to their own opinions about future interest rates and home prices.B
Our thanks to guest blogger Chris Hill with Columbia Mortgage in Vancouver. Chris is licensed in Oregon & Washington and takes great care of his clients!
You can reach Chris at:


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