A recent article by the National Association of Realtors stated that FHA will be cutting the mortgage insurance premiums for the first time in two years. This means that for homebuyers looking to get a mortgage, things will get much easier and less expensive. The FHA, Federal Housing Administration, announced that there cutting their annual mortgage insurance premiums from .85% to .60%. This will help low and moderate income buyers get into a home easier and for less money.
An FHA mortgage is already less expensive than a conventional mortgage whereas homebuyers need 3.5% as a down payment versus the traditional 10 to 20% on a conventional. This deduction will be saving the homebuyer even more so they choose an FHA mortgage.
In the past, mortgage insurance has made it impossible for many first-time and lower-income borrowers to be able to afford a mortgage because even that small percentage could add several hundred dollars on two a mortgage. The high cost of mortgage insurance has simply priced many buyers out of the market.
The NAR Pres. William E Brown stated that every time the FHA cuts mortgage insurance, more buyers can meet the debt to income ratio required to purchase the property. This means that many more borrowers can now be eligible to purchase a home through FHA. This also puts more money in the fund to protect taxpayers as well.
While this is just one step in the process, other changes should be made as well. Eliminating the FHA's "life of loan" mortgage insurance requirement is an important step in making homes even more affordable for moderate to low-income borrowers. This "life of loan" policy requires borrowers to maintain mortgage insurance on an FHA property regardless of their equity position. Borrowers with traditional mortgage insurance can usually eliminate this once they reach the 80/20% equity in the property. This means that once the borrower owes less than 80% of the value of the property the mortgage insurance can be eliminated but currently, FHA still requires this for the life of the loan unless the borrower refinances.
To find out if you are now eligible for an FHA mortgage with this reduction in mortgage insurance premiums contact my office today.