FHA reduces annual mortgage insurance premiums.
This could be the ideal time to buy a home.
The Fed announced recently that it will reduce mortgage insurance premiums by .5% over the next few months in a move to reduce mortgage costs for creditworthy borrowers. For anyone concerned that this indicates a slackening of protective measures put in place since 2008, don’t. The real story here is reduced costs.
Let’s take a look at how those reduced costs might benefit your mortgage loan budget.
The move impacts FHA-backed loans. These are loans designed for first time buyers, allowing them to make a deposit of as little as 3.5 percent of the purchase price. The buyers must meet all of the other standards of creditworthiness but have the benefit of a very low down payment.
Lower mortgage costs will save FHA borrowers about $1,000 per year on a $200,000 loan. That’s the equivalent of a tank of gas each week!
“We are optimistic that more affordable FHA loans will have a positive impact on first-time buyers who have been entering the market at a lower-than-normal rate,” National Association of REALTORS® President Chris Polychron said in a statement. “NAR is a strong supporter of the FHA and its vital role in the mortgage marketplace for home buyers. We will continue our work with the administration to help make the dream of home ownership a reality for millions more Americans.”
In 2013, the FHA required a $1.7 billion bailout from the government after suffering losses from a high number of loan defaults in the aftermath of the financial crisis. Since 2008, FHA has increased its annual premiums for FHA borrowers five times. The National Association of REALTORS® estimated that nearly 400,000 creditworthy borrowers were priced out of the housing market in 2013 because of the higher costs in FHA insurance premiums.
“This action will make home ownership more affordable for over two million Americans in the next three years,” said Julian Castro, secretary of the Department of Housing and Urban Development, which oversees FHA. “By bringing our premiums down, we’re helping folks lift themselves up so they can open new doors of opportunity.”
The new policy is expected to go into effect by the end of the January, meaning this could be the perfect time for you to lock in a rate for your first home. At minimum, you will want to become pre-qualified so you are ready to get your mortgage when you find the right home.
I can help you with all of this. Just give me a call at 904.894.6037 or send me an email. I will help you find the right loan at the right rate, and assist you with every step in the mortgage process.