FHA to Lower Cost of Mortgage Insurance

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Premiums for FHA mortgage insurance, which is designed to protect the agency in case a borrower defaults on a loan, will be cut from 1.35% of a loan’s value to about 0.85%.As a result, a typical first-time homebuyer will save $900 a year on their mortgage payments. Existing homeowners who refinance into an FHA loan will see similar savings.

“Too many creditworthy families who can afford — and want to purchase — a home are shut out of homeownership opportunities due to today’s tight lending market,” the White House said.

The White House estimates that the lower premiums will enable up to 250,000 new buyers to purchase a home.

In the wake of the financial meltdown and ensuing foreclosure crisis, FHA raised its mortgage insurance premiums to shore up its finances. But now home values are on the rise, the jobs picture is improving and foreclosures have fallen to their lowest level since 2006.

Last March, the FHA announced it would not need another bailout due to improving financial conditions. The White House said that even after lowering premiums, reserves in the fund are projected to grow by $7 billion to $10 billion annually.

Freddie/Fannie to offer 3% down payment programs: FHA loans have been an important lifeline for low-income and higher risk borrowers in the wake of the financial crisis. As private lenders tightened their lending standards, FHA-backed loans became the only mortgages available to many of those buyers, given their minimal down-payment requirements and easier credit-score hurdles.

FHA mortgage rates are now at their lowest levels in close to two years. Buying a home with FHA financing has never been cheaper. and millions of U.S. homeowners with FHA-backed loans are now eligible to refinance.

For a complimentary FHA quote from a local mortgage professional, contact me by phone or email.  Rates are available at no cost, with no obligation to proceed, and with no social security number required to get started.