Good News for Homebuyers

The Federal Housing Authority is reducing FHA mortgage-insurance rates from .6 percent to .85 percent beginning January 27, 2017. The U.S. Dept. of Housing and Urban Development estimates that this quarter-point reduction will save borrowers an average of $500 this year. The reduced costs associated with the loan will also help more credit-worthy borrowers qualify.
FHA and other government-insured and government-backed loans encourage homeownership by making home loans accessible to credit-qualified borrowers who lack the cash or the stellar credit score needed to qualify for a conventional loan. The loans are less risky to lenders because the mortgage insurance reimburses them if borrowers default.
The┬áNational Association of Realtors would like to see further changes implemented. For example, until fairly recently, FHA mortgage-insurance premiums stopped once borrowers had built 20 percent equity in their homes — 20 percent being the minimum down payment lenders typically require for uninsured conventional loans. However, the FHA since has implemented what NAR calls a “life of loan” requirement that forces homeowners to continue paying mortgage insurance no matter how much equity they have.