FHA says premium cut will save FHA borrowers $500 a year on average
Low- to moderate-income homebuyers will get a boost in 2017, with the Federal Housing Administration (FHA) set to cut mortgage insurance premiums later this month.
The move will “will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA,” said National Association of Realtors President William E. Brown in a statement.
Annual premiums going down
The FHA will reduce the annual mortgage insurance premium most FHA borrowers pay by a quarter of a percentage point starting January 27. Annual premiums will drop to 0.6 percent from 0.85 percent.
“Every time we cut the cost of mortgage insurance it means more borrowers meet the debt-to-income ratio required to purchase a home,” said Brown, explaining why the move should lead more aspiring homebuyers to pull the trigger.
The rate cut means new borrowers who take out mortgages insured by the FHA will save an average of $500 this year, according to HUD.
The action “comes at the right time for consumers who are facing higher credit costs as mortgage interest rates are increasing,” according to Julián Castro, the U.S. Housing and Urban Development (HUD) Secretary, which oversees the FHA.
Why this is good news
The FHA makes it possible for banks to lend to borrowers who might not qualify for conventional mortgages.
“FHA mortgage products exist to serve an important mission: providing homeownership opportunities to creditworthy borrowers who are overlooked by conventional lenders,” said NAR President William E. Brown in a statement.
“The high cost of mortgage insurance has unfortunately put those opportunities out of reach for many young, first-time- and lower-income borrowers. Now, we have a real opportunity to get back on track.”
This is great news for many homebuyers, especially in light of the rate increases occuring in today’s market. Please contact me at 951-256-0812 for further info, or if you’d like to take a second look at getting approved for FHA financing.