Cuts could have saved eligible homeowners an average $500 annually
We got some disheartening news toward the end of the business day last Friday. The FHA Mortgage Insurance Premiums (MIP) reduction scheduled to take effect on mortgages with close/disbursement dates on or after January 27 have been “suspended indefinitely” according to the Department of Housing and Urban Development (HUD). The FHA mortgage insurance rate cut would have reduced annual premiums by a quarter (1/4) of a percent, making it easier for realtors to expand access.
President Donald Trump made the move just hours after being sworn in. While the move drew criticism from Democrats, it reflects some Republicans’ concerns about the FHA mortgage insurance rate cut. Specifically, that it could burden taxpayers if borrowers couldn’t make their payments, forcing the FHA to cover the losses.
FHA-backed mortgages help credit-worthy borrowers get loans with down payments as low as 3.5%. It’s worth noting that the average credit score of an FHA borrower in Q3 2016 was 679.
The FHA received a $1.7-billion bailout in 2013 to cover its losses on low-down-payment mortgage insured from 2007 to 2009 after the subprime mortgage collapse. However, the organization’s finances have greatly improved with four straight years of growth. With a Mutual Mortgage Insurance Fund capital reserve ratio exceeding requirements for the last two years, former HUD Secretary Julián Castro said it was “time for FHA to pass along some of the modest savings to working families.”
Politics aside, is there a silver lining?
As housing prices continue to climb, the rate cut would have certainly made it more affordable for buyers to close on a home, especially first timers. The example above, estimated at an average savings of $500/year, would have been just over $40/month.
We like to keep things in perspective…sometimes the headlines read more impactful than they may actually be! While this move disappoints us, we have no interest in playing politics. For the team at AmeriFirst Boardman, it’s business as usual. We had great success with FHA-backed loans in 2016, and we have no intention of stopping now.
FHA-backed mortgages are still ideal lending products for borrowers with low incomes or who have lower credit scores. And with our area’s aging housing stock, the FHA 203k renovation loan is such a great way to get into a home, renovate it to be what you want, and build instant equity.
If you want to learn more about FHA lending, schedule a Lunch & Learn with our team…lunch is on us!