Mortgage insurance rates have been cut for FHA loans. In a move to get first time home buyers back into the market and make home buying more affordable Mortgage insurance for FHA loans has been lowered.
If you were paying attention earlier this month President Barack Obama announced in Phoenix a plan to cut the mortgage insurance for FHA loans in half for most first-time homebuyers and some existing owners, a move to make homeownership more affordable for hundreds of thousands, according to the U.S. Department of Housing and Urban Development..
The action from the Federal Housing Administration is expected to save the typical buyer $900 a year in mortgage insurance costs, and allow 250,000 more families buy their first U.S. home, HUD officials said.
The 7.7 million U.S. homeowners with FHA loans should be able to refinance and also cut their mortgage insurance costs with the change, according to an announcement from the White House today.
HUD Secretary Julian Castro said the housing market’s recovery is underway but more actions are needed to help “creditworthy borrowers, who have been shut out in tight lending market.”
“This (the FHA insurance premium cut) is an example of one of the new policies that will be included in (Obama’s) State of the Union address to help make sure that more Americans benefit from the economic recovery,” he said.
Arizona housing advocates say the move will help more people buy because the typical mortgage insurance premium can cost $150 or more a month on a $250,000 house.
“This reduction to mortgage insurance will be very helpful,” said Patricia Garcia Duarte, CEO of Neighborhood Housing Services of Phoenix. “Our average buyer spends about $95 dollars in mortgage insurance per month, but we have seen FHA insurance fees as high as $300 per month.”
The plan calls for cutting FHA mortgage insurance premiums from 1.35 percent of the loan amount to 0.85 percent.
FHA loans have skyrocketed during the past few years as the federal agency has tried to narrow losses from the housing crash.
Mike Orr, real estate analyst with the W.P. Carey School of Business at Arizona State University, said lower insurance premiums is “a step in the right direction” to helping more people buy.
Metro Phoenix home sales are down more than 10 percent from 2013’s pace, and many housing analysts say one of the biggest drops has been among first time home buyers.