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The government has just made home buying (slightly) more expensive

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Americans are still wary about buying homes, as many remain strapped for cash and gun-shy after the market’s recent meltdown. Banks, meanwhile, have tightened their lending requirements, so even those with enough money and great credit scores are having trouble getting loans. All this is holding back the housing market. And while the government has tried to help, it has also just made getting a new mortgage slightly more expensive for some potential buyers. Alex Brandon AP

On April 1, the Federal Housing Administration raised its mortgage insurance premiums, both for the upfront payments—which will rise from 1 percent to 1.75 percent—and annual premiums by 0.10 percent for all single-family homes under $625,500. Typically, the agency requires anyone who receives an FHA loan—most go to first-time and moderate-income homebuyers—to get FHA mortgage insurance as well.

It’s a modest increase, in the scheme of things: the FHA hike on upfront premiums will increase monthly mortgage payments by $5 on average, though total payments could rise by nearly $25 per month for some borrowers, according to Inside Mortgage Finance. But it’s also the second increase in recent months: in December, Congress passed a previous FHA mortgage fee hike in order to pay for the two-month extension of the payroll tax cut. Under the earlier change, someone buying or refinancing a $200,000 house would have to pay $17 more every month, according to one estimate.

Why, then, is the FHA raising premiums while the housing market remains so fragile? It’s because the agency has been bleeding money as Americans are still have trouble paying off their FHA housing loans, and there’s still a big overhang of delinquent loans from 2009 and 2010, according to a new report from the U.S. Department of Housing and Urban Development. The FHA’s capital reserves have fallen as a result, prompting concern from Congress that the agency might require a taxpayer-funded bailout.

FHA Acting Commissioner Carol Galante recently told members of Congress that the agency is “not broke,” but explained that the new hike in mortgage insurance premiums would “help protect our capital reserves.” Fannie Mae and Freddie Mac are facing the same balancing act, as housing officials are trying to shore up the housing giants’ finances and at the same time trying to extend relief to homeowners and revive the housing market.

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