The cost of borrowing will be going up as the FHA is raising it’s premiums for new loans starting October 1^st, 2008. Like almost everyone who has made or backed loans over the past few years, losses are mounting at the FHA. The need to cover these losses and protect against future losses is the goal of this increase to 1.75%.

Of course, one of the reasons that the housing market is continuing to have trouble is that credit is tight and loans are getting more expensive. The pendulum is swinging so far over that soon housing costs and potential buyers will not be the problem, it will be the inability for the average consumer to get a loan, that will keep the housing market in the doldrums.

In a posting on its Web site Tuesday, the FHA said the upfront premiums charged to most borrowers will be 1.75% of the loan amount, effective Oct. 1. That is up from the 1.5% that was in effect until July 14, when the FHA adopted a “risk-based” pricing system that created a range of charges depending on borrowers’ credit scores and the amount of the down payment or equity they owned in the homes. In late July, Congress approved a housing bill that included a provision requiring the FHA to revert to a standard premium at least until Oct. 1, 2009.

On a $300,000 loan, the new upfront premium works out to $5,250, up from $4,500. The annual premiums paid by borrowers would remain at 0.50% to 0.55% of the loan balance. via WSJ.com.

Thanks for reading this post. If you would like to see more articles like this, please come visit The Real Estate Bloggers. where it was originally published.

Upfront Premiums Increasing For FHA Mortgages