Mortgage Insurance harder and harder to get, except from FHA.

The Wall Street Journal reports that private mortgage insurers are adding more and more areas to their list of “declining markets.” If you live in one of these markets (like Chicago) you will have to put much more down (10% is common) and pay more for the insurance premium (up to .75% of the loan).

Couple these new restrictions and rates with the fact that more lenders are demanding that you take out mortgage insurance or they won’t make the loan, and it adds up to fewer mortgages for more money. This will also make it harder to sell a house you own.

In the face of this, many more people are turning to The Federal Housing Administration (FHA) for mortgage insurance. The FHA allows down payments as low as 3% (and there is even a legal way around that as we reported in a recent BLOG entry). But even the FHA is getting stricter. It is now charging higher rates to borrowers it considers to be high risk.

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