A new FHA rule that took effect on June 3 will cushion the agency against a budget shortfall but at the same time will saddle its mortgage borrowers with higher costs. Going forward, new home buyers now must pay the insurance premium on their FHA loan -- which previously expired once 22 percent of the principal was paid -- for a minimum of 11 years and possibly for as long as the life of the loan. That could mean hundreds of extra dollars each month in payments for FHA borrowers, who typically have flawed credit and/or cannot contribute a large down payment. "This is going to hit hard in low-income and middle-class neighborhoods," warns John Settles, a Wells Fargo mortgage consultant. He says he is telling his clients that while their situation may not have changed, "if you buy the same house that you were planning to a month ago, it's going to cost you more."
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