On January 26th, the Federal Housing Administration reduced its mortgage insurance premiums by 50 points, from 1.35% to 0.85%. This was by executive order from President Obama. The cuts will help more than 800,000 homeowners save about $900 per year and existing homeowners who refinance will see similar savings. The White House estimates that the lower premiums will enable up to 250,000 new buyers to purchase a home.
FHA raised its mortgage insurance premiums as a result of the financial meltdown and foreclosure crisis. Now, home values are on the rise, jobs are improving and foreclosures have fallen to the lowest level since 2006. FHA will not need another bailout due to improving financial conditions.
I’m hopeful that this will have a significant positive impact for many borrowers and the housing market.