The skyrocketing cost of mortgage insurance
could make Federal Housing Administration loans a bad deal.
I’m Ilyce Glink with today’s Real Estate Minute.
Many potential homebuyers who need a mortgage but lack a 20-percent down payment look to
the FHA for a loan. It allows you to put down as little as 3-percent. But that savings up
front could cost you in the long run because of mortgage insurance premiums required by
the FHA. Premiums have doubled over the last 5 years.
Insurance on a median priced home $212,000 used to be just over $9,000 for the first
five years. Now buying that same home today will cost more than $17,000 in that same time
frame. What’s even more disturbing is that in most
cases, even after you have 20 percent equity in your home, the FHA won’t cancel your
premiums, unlike conventional lenders. You will have to continue paying the premiums
for the entire life of your FHA loan. The only way a FHA loan could be beneficial
is if your credit score is below 660 or you have a small down payment and can’t get
decent financing through a conventional lender. I’m Ilyce Glink, for more details and links
visit my website, ThinkGlink.com, where we’re rebuilding America, one house at a time.