Changes for borrowers

New rules went in effect today for loans insured by the Federal Housing Administration to adjust the types of mortgage insurance paid by homeowners.  The annual insurance premium, paid monthly by borrower, increased to from 0.85 to 0.9 percent from 0.5 to 0.55 percent, while the upfront insurance premium fell to 1 percent from 2.25 percent.  However, the decrease in the onetime upfront payment will barely offset the increase in the monthly premium.  For example, “The changes, under an example provided by the F.H.A., mean that a borrower who puts 3.5 percent down on a $154,000 house with a 30-year fixed-rate mortgage at 5 percent (such a consumer typically earns a gross annual income of $54,000, according to the agency) and who finances the upfront premium into the loan will see monthly mortgage payments, including taxes, interest and the two insurance premiums, rise to $1,238 from $1,205. The example is based on median data, including property taxes put at about 2.5 percent of home value. That increase includes the drop in the upfront mortgage insurance, to $1,486 from $3,344 — but also includes the rise in the monthly insurance premium, to $111 from $68.”  It is clear that the borrower saves $1,858 upfront, but pays an additional $15,480 over the period of 30 years.