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FHA cuts insurance costs for homebuyers
Friday, January 09, 2015
Many consumers who’ve been priced out of the housing market in recent years because of high insurance premiums should now have greater access to a home loan. The Federal Housing Administration (FHA) announced it is lowering insurance premiums on FHA mortgages by half a percentage point. The rate will drop from 1.35% to 0.85% annually.
President Obama announced the insurance premium reduction as a means to making mortgages more affordable for more Americans. Savings are estimated at $900 a year per borrower. The reduction will apply to new FHA mortgages and refinanced home loans.
The rate cut is expected to translate into greater access to home loans for first-time buyers and lower income borrowers. Estimates are that 250,000 new homebuyers will have the opportunity to receive an affordable, 30-year fixed rate FHA mortgage within the next three years. FHA insurance will still remain on mortgages for the life of the loan.
FHA does not make loans. It insures mortgages. FHA insurance premiums cover lenders’ losses in case of mortgage defaults.
Prior to this announcement, Consumer Action joined dozens of other organizations calling on the Administration to lower FHA insurance premiums to make mortgages more affordable. Click here to view the letter.
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