Extra Fees Make FHA Loans a Challenge
- Apr 04, 2008
Washington, D.C.–Banks are adding fees and restrictions to make loans insured by the Federal Housing Administration more expensive and harder to get, The Wall Street Journal reports. The FHA recently received higher loan limits–$729,750 for high cost areas–until the end of the year, which are expected to be raised permanently. As other mortgage types have become more difficult to attain, FHA loans have grown more popular. Rates have increased because of a reduced demand from investors for jumbo FHA loan-backed securities, according to traders. Securities backed by smaller loans are expected to be more actively traded, and the larger loans could be refinanced more quickly–making them less valuable to investors.This week, J.P. Morgan Chase & Co.’s home mortgage unit told lenders it would require price adjustments that will increase the FHA loan interest rate by a half a percentage point, the Journal reports. J.P. Morgan Chase declined to comment. In addition to becoming more expensive, FHA-backed loans are also more difficult to get: Although the FHA doesn’t have credit score requirements for borrowers, some banks have set a minimum score of at least 580.