FHA Institutes Risk-Based Pricing. Owners Of Multi-Family Properties Get the Best Deal

The FHA rolled out risk-based mortgage pricing this week, matching steps that Fannie and Freddie took earlier this year. In its press release, the FHA lists some exceptions, including 15-year mortgages.

Prior to the risk-based changes, FHA home loans were usually accompanied by an easy-to-remember fee schedule of 1.500 percent of the loan size due at closing and an ongoing annual mortgage insurance premium equal to 0.500 percent of the original loan size.

The new fee schedule is not quite so clear. "Ideal" borrowers are rewarded for using FHA-insured mortgages. "Risky" borrowers are penalized.

Of course, rewards and penalties are relative. Versus conforming mortgages -- ones guaranteed by Fannie Mae and Freddie Mac -- home buyers using FHA will generally get worse rates and pay higher fees over the long-term. This is especially true when credit scores are low and/or downpayments are small.

One notable exception: home loans for multi-unit properties.

The FHA does not impose additional loan-level pricing adjustments for 2-unit, 3-unit or 4-unit properties. Fannie and Freddie, by contrast, impose hefty multi-unit property fees of up to 1.000 percent.

This detail -- for the right homeowner -- could render FHA much more attractive, even if FHA mortgage rates are slightly higher than their conforming counterpart. As always, choosing the right mortgage product is rarely black and white.

Sometime soon, though, expect risk-based mortgage pricing will get fuzzier, accounting for additional details than just what's in the FICO-and-LTV Matrix shown above.

Until it does, though, remember this page. It's a lot easier to make sense of the chart than it is to translate official government speak on FHA adjustments, that's for sure.