Dear Mr. Myers: We started looking for a house to buy in August, and a mortgage broker preapproved us for an FHA loan. We haven’t found a home that we like yet, but the broker called us last week to say that FHA loan costs are going to rise. Is this true, or is the broker just trying to rip us off so he can make more money?
Answer: The broker isn’t trying to rip you off. The Federal Housing Administration, commonly referred to as the FHA, is boosting the upfront fees it charges to borrowers who use the program after Oct. 1.
The government-run FHA doesn’t loan money directly to borrowers, but instead insures loans for banks and other financial institutions that issue mortgages to buyers who cannot qualify for a traditional home loan. If the buyer later defaults, the FHA’s insurance coverage helps to pay for part of the bank’s losses.