Prepare to afford $5,000 less house come April.

19 02 2011

FHA has what is called mortgage insurance on their loans, for anyone borrowing more than 80% of the value of their home, which is most people obtaining an FHA loan.

The maximum loan to value ratio they allow is 96.5%.  Their rate hike will attribute to about a $30/month increase in payment for a $160,000 home.

If you put that into perspective – for every $1,000 you finance it costs you about $5-6/month….so by them raising the insurance by $30, it means you can afford $5,000-$6,000 less of a home for the same payment.

FHA to increase mortgage insurance premiums one quarter of one point « HousingWire.

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