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Just when you think the gyration of home loans would settle down after all of the previous changes... here comes another one from the FHA.

FHA ( Federal Housing Admin) has become a popular product for home mortgages. According to the attached article from the Wall Street Journal, FHA now underwrites 56 % of home loans as of 2009. This was only 6 % back in 2007.

What are they changing?: In an FHA loan, the buyer must pay upfront Mortgage Insurance Premium ( MIP) which is an additional 1 % of the borrowed amount that is rolled into the loan. So.. if you are borrowing $200,000.. your actual loan amount would be an additional $2,000 for a total of $202,000.

Also.. in the monthly premiums.. there is an additional MIP charge. Currently, it is .9% of the borrowed amount accured annually  but divided up monthly. So.. on the same $200,00 loan above.. the MIP is based on the $202,000 and the monthly MIP would be an additional $151.50 to your payment.

This .9% is going up to 1.15% ( 1/4% change) effective 4/18/2011. So now, the additional MIP to your payment will be $193.58, an additional $42.08.

Why are they changing? The MIP is like an insurance fund to reimburse banks when buyers default. With the onslaught of foreclosures and folks "underwater" in their mortgage, the fund needed some boosting and some resources to insure its existance.

Why is FHA so popular?  An FHA loan requires only a  3 1/2 % down payment. A conventional loan.. depending on credit score, requires 10% + down. In a tough economy, cash is scarce. The lower downpayment is the major reason why people go to the FHA product.

Here is the link to the WSJ article. This explains EVERYTHING!

http://online.wsj.com/article/SB10001424052748703867704576183003307736130.html?mod=foxbiz

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