FHA Mortgage Rates Tick Upward

NEW YORK (MainStreet) — It’s about to get a bit more expensive to take on a Federal Housing Administration (FHA) mortgage.

Starting in April, the FHA is hiking its government-insured loans by 25 basis points - to 115 basis points on single-family home loans. And that’s not all – the FHA's upper ceiling on home loan limits is coming down, too, along with some other new ideas from the agency.

Right now, some of the FHA’s proposals are just that – proposals. The FHA included the premium rate hike in President Obama’s 2012 budget, which still needs to be approved by Congress, after all.

But in a Washington, D.C. press conference on Monday, U.S. Housing and Urban Development director Shaun Donovan said the new premium rate hike was one proposal that doesn’t need Congress’ approval, and is expected to be implemented within 60 days.

Donovan calls the rate hike a “belt-tightening” move designed to shore up the FHA’s capital reserves and keep it stable during a sustained period of weakness in the U.S. housing market.

“The President has said that we need to live within our means to invest in the future,” says Donovan. “That has meant tough choices, including to programs that, absent the fiscal situation, we would not cut. But American families are tightening their belts and we need to do the same.”

Donovan notes that the White House’s new budget proposal, released on Feb. 14, freezes domestic spending on most government agencies for the next five years. That would chop $400 billion off the national deficit over the next five years. Among the HUD programs that would be impacted by the rate freeze would be the Community Development Block Grant, HOME Investment Partnerships and new construction components of the Supportive Housing Programs for the Elderly and Disabled.