FHA & Risk-Based Insurance
May 31st, 2007
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Syndicated columnist Ken Harney reports that barriers remain to FHA reform.But whether there are or are not barriers, individual borrowers might want to ask if they will benefit should the new proposals pass in the Congress.
For instance, one idea is to change the FHA insurance premium system. Currently borrowers pay a 1.5 percent fee at closing plus .5 percent of the oustanding balance, billed monthly.
With risk-based insurance premiums, some FHA borrowers would (hopefully) pay less for insurance because they have great credit. Others would pay more because their credit is weaker.
In other words, under the current system every FHA borrower pays the same premium, regardless of their credit standing. Under the new system it will be every borrower for himself.
Which is better? If you have great credit — and if you can get lower rates than those available in today’s system - then you should favor risk-based premiums. But if you have weak credit, then pray that the new system does not pass because you will plainly face higher rates on your next FHA loan.
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This entry was posted on Thursday, May 31st, 2007 at 6:31 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Listen to FHA Loan Pros columnist Peter Miller on American Public Radio:
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May 5th, 2008 at 9:32 am
My husband passed away without a will. I am in the process of having myself made executor of his estate. Since we bought our home when we were not married (we got married in 2003, august)I will need to put the home in my name. Also, since what I owe on the home is less than $50,000.00 do I still have to pay a fee each month for the FHA Risk Insurance. I thought that once we owed under $50,000.00 we could request that this be dropped?? Thank you for your help on this matter.