Obama Lowers FHA Mortgage Insurance by 0.5%admin
If you were afraid that you had been left out of the housing market, your situation may have been changed dramatically with President Barack Obama’s announcement Jan. 8 in Phoenix of a 1/2 percentage point reduction in the premium new borrowers pay for FHA mortgage insurance.
This is exciting news for anyone who has been contemplating purchase of a new home. Effectively, it means that buying power has been increased substantially, the average buyer’s payment will be reduced by about $90 a month. In practice, a buyer who previously qualified for a $200,000 loan could now be approved for a $220,000 mortgage, for the same payment.
It is also good news for those who entered into a loan during the past three years. Refinancing now with the new rate would result in a savings of more than $1,000 a year. The new premium rate will become effective towards the end of January.
The action reflects a healthier U.S. housing market, in addition to the improved condition of the FHA single family mortgage insurance fund, which has increased in value by $21 billion over the past two years. Castro noted in his announcement that this reduction in rate is a “prudent measure” that will keep the FHA on a “positive financial trajectory.” The rates were initially increased in 2009 in response to the country’s severe housing crisis, action taken in an effort to stabilize the MMI Fund. Observers had previously predicted that the president would recommend lowering FHA premiums. The Obama administration has reportedly been seeking a way to jump-start the U.S. housing market once again, even considering moves that would sidestep Congress. Whether this is the only such action to be taken remains to be seen.
This week’s action is expected to allow more than two million Americans to realize the dream of affordable home ownership over the next three years. While the whole subject of home pricing, mortgage lending and recovery after the housing bubble burst is complicated, this is seen as a positive move, particularly in areas like Phoenix which have yet to regain the robust values and sales records of the past. Traditional housing market rebounds have signaled economic recovery; that has not occurred during this downturn and it is hoped that this action will help to spur a renewed interest in home ownership, and lead to a new home buying surge.
If you have any questions about what this means to you as a prospective buyer, or if you have an existing loan that might benefit from refinancing, contact me at your earliest convenience to discuss the options. More details will become available in the coming weeks, but as a professional mortgage loan officer specializing in FHA financing, I have my eyes on the pulse of the market and will be happy to discuss possibilities with you.