Today, the Assistant Secretary for Housing issued a statement regarding upcoming changes to FHA mortgage insurance premiums.

Assuming President Obama signs H.R. 5981, the up-front FHA mortgage insurance premium will be decreased by 1% and the annual mortgage insurance premium will be increased to .85-.90%, depending on loan-to-value. This premium is paid as part of a borrowers monthly mortgage payment.

The current up-front premium is 2.25% on most loans and the annual premium is .50% - .55%. Earlier this year, in response to dangerously low capital ratios, FHA increased the up-front mortgage insurance premium to 2.25% and announced plans to pursue a restructuring of the annual charges that were subject to congressional approval. With the passage of this bill, the proposal appears complete.

While the proposal is a positive sign, as it will likely shore up FHA's capital reserves, it will also make securing FHA loans for some buyers with higher debt ratios more difficult. As an example, a $200,000 FHA loan purchase with the minimum required 3.5% down payment will have a principal and interest payment amounting to $995.01. The current monthly mortgage insurance would add $88.46 per month to that payment in addition to the borrower's property tax and insurance escrows. With the proposed changes, the monthly mortgage insurance premium would increase to $144.75. To be fair, most borrowers also finance the up-front mortgage insurance premium, so the decrease from 2.25% to 1.25% would represent a savings of $1,929 plus any interest accrued over the life of the loan.

If you are thinking using an FHA loan to buy a home in the near future, it might be smart to make your move sooner rather than later.