The Federal Housing Administration announced that it will lower the cost of its mortgage insurance for potential borrowers. The White House released a statement that they will lower the mortgage insurance rates from 1.35% of the loan’s value, down to 0.85 percent. Mortgage insurance is designed to keep lenders safe whenever a borrower defaults on their loan.
The change to the mortgage insurance rates could save a first-time homebuyer $900 a year on their payments. For a lot of buyers sitting on the fence, this may be the starting gun for which they were waiting. The White House believes that more than 250,000 additional, potential home buyers will now be able to purchase a home and stay within their means. Homeowners who already have an FHA loan will have the opportunity to refinance and also see similar savings.
The FHA had raised mortgage insurance after the 2008 recession. However, rising home values, a larger, wealthier workforce, and declining foreclosure numbers gave them the confidence to let off slightly on the reins of the housing market.
How many buyers will be enticed into buying is yet to be seen, but anyone looking for or has an FHA loan should discuss the changes with their lender and see what potential savings could be had.
Hart Real Estate Solutions