Federal agency says premium cut will save borrowers $500 a year on average
- The FHA will reduce the annual mortgage insurance premium most FHA borrowers pay by a quarter of a percentage point starting January 27.
Low- to moderate-income homebuyers will get a boost in 2017, with the Federal Housing Administration (FHA) set to cut mortgage insurance premiums later this month.
The move “will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA.
Annual premiums going down
The FHA will reduce the annual mortgage insurance premium most FHA borrowers pay by a quarter of a percentage point starting January 27. Annual premiums will drop to 0.6 percent from 0.85 percent, according to NAR.
The rate cut means new borrowers who take out mortgages insured by the FHA will save an average of $500 this year, according to HUD.
The action “comes at the right time for consumers who are facing higher credit costs as mortgage interest rates are increasing.
Why this is good news
The FHA makes it possible for banks to lend to borrowers who might not qualify for conventional mortgages, serving as a wellspring of credit for those buyers.
FHA borrowers pay both an insurance premium to the FHA and higher interest rates in return for a mortgage that requires as little as a 3.5 percent down payment.
FHA mortgage products exist to serve an important mission: providing homeownership opportunities to creditworthy borrowers who are overlooked by conventional lenders.
The high cost of mortgage insurance has unfortunately put those opportunities out of reach for many young, first-time- and lower-income borrowers.
After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families.
This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.