FHA due to cut Rates
Something that will help FHA borrowers is a reduction in the rate being charged for PMI insurance. As of Januarty 27th 2017 the rate will drop from .85% to .6% which is great news for borrowers. This change will effect the debt to income ratio which gives the buyer more buying power. As per Inman news this will save borrowers $500 this year.
The benefits of an FHA loan are lower downpayment is required as well as lower credit scores. Also these loans are guaranteed by the FHA Federal Housing Administration. The guidelines are set to help people that have good credit but do not qualify for a conventional loan. (20% down) Maybe they don't have the down payment to do a conventioanl loan. Often these borrowers can be first time home buyers or in a lower income bracket.
Is it affordable for the FHA
One of the reasons the rates went up was due to the number of loans that were defaulted on between 2007-2009. The FHA had to make sure that they had enough funds to back the loans that they were insuring. In the last 4 years the FHA mutual mortgage fund has improved which is the reason for the reduction in the rate.
For more information on FHA Loans
This content created by Barbara VanderMeulen Lead Buyer Specialist
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