Why Is My Mortgage Payment Going Up?!

It's not uncommon for homeowners to receive a mailing from their mortgage company with a lot of numbers, one of which is their new, increased, mortgage payment. This can be confusing and frustrating, often leaving homeowners to wonder, "how can they just raise my payment when I have a fixed mortgage rate?"

The issue is most often escrow payments. As part of your payment each month you pay down some of the principal on the loan, some money in interest, and money to go into your escrow account. Using the funds in your escrow account your mortgage servicer pays for anything you have chosen to "escrow", such as homeowners insurance, other insurance for the property (flood, wind and hail, earthquake, etc.), and property taxes.

Ideally the escrow portion of your monthly mortgage payment should equal 1/12th of the total of all the bills that will be paid out of the escrow account. Unfortunately this doesn't always happen. At least once a year the mortgage servicer will take a look at the account and see whether it is on track, and contains the amount needed to pay the upcoming obligations. If there is too much in the account (over a certain amount, sometimes $50) they will send you a check for the overage. If there is too little they will generally raise your monthly payment, and/or ask you to pay a certain amount to make up the difference.

A shortage could be due to an increase in your insurance, property taxes, or other bills, or the result of a miscalculation somewhere along the way. Be sure to check that all bills paid out of your escrow account were for the correct amount  as an overpayment could cause a shortage on your escrow account.

Types Of FHA Loans

Many people are familiar with FHA loans. They are mortgages which are backed by HUD, a division of the US government, and are commonly used to purchase or refinance single family homes. Some of the advantages over conventional financing are that only a low downpayment is required, and FHA loans can be easier to qualify for.

You might not be aware of several specialty FHA loan programs, that can be an excellent fit for certain scenarios. These include:

Energy Efficient Mortgage Program
This loan allows the homeowner to finance the cost of certain energy efficient improvements into their mortgage.

Rehab Loan - 203(k)
Ideal for someone who wants to buy a "fixer-upper" but doesn't have the cash on hand needed to do the work on the property. This fha mortgage allows the homeowner to finance the cost of renovating the house into the home loan.

FHA Condo Loans
Used to buy or refinance a unit in a condominium project. The condo community must meet eligibility requirements in addition to the homeowner and the specific property.

Manufactured Home Loans on Owned Land Vs. Leased Land
There are two programs available - one finances both the land and the home, and the other finances just the mobile home when the land is rented (such as in a mobile home park or community.)

FHA Reverse Mortgage
This special program for seniors 62 or older to tap into the equity in their home to be used for living expenses without selling their home.

Rate Update: Mortgage Rates Hold Steady

According to Freddie Mac's weekly mortgage rate survey the avergage rates around the US have remained relatively constant over the past two weeks. 30 year rates increased just slightly to 4.81%(0.8 in points and fees), up just 0.01% from 4.80% (0.7 in points and fees) the week of 1/27. 15 year home loan pricing dropped by the same amount, falling from 3.70% to 3.69% (both with 0.7 in points and fees). 5 year adjustable rate mortgage rates didn't move, with an average rate of 3.26% (0.6 in points and fees) for both weeks.

It's important to remember that mortgage rates can change at any time. If you've been considering a refinance run the numbers with a mortgage calculator to see if it makes sense for you at today's mortgage rates. If rates were to drop dramatically in the future you can generally refinance a second time, but if home loan pricing rises there won't be a way to access today's low rates.