For many homebuyers looking to buy a home, the last several years has been a mixture of both blessings and curses. On the one hand, interest rates have been at an all time low, yet on the other, the newly enacted Dodd-Frank lending practices have made lending money far more stringent. Yesterday though, the FHA cut mortgage insurance premiums for the first time since 2015 and this is good news.
The FHA announced it was cutting their annual mortgage insurance from .85 percent to .60 percent. What does that mean for the average buyer? It is a key step in helping low, moderate and first time homebuyers get into homes.
Recently, though, the high cost of mortgage insurance has put home ownership out of reach to many. While FHA mortgages represent a low down payment option for buyers, the additional insurance requirements priced many young and first-time homebuyers out of the market.
It really becomes a simple question of math. Every time mortgage insurance rates are cut means the borrower meets the debt-to-income ratios or (DTI) required by Dodd-Frank laws.
The FHA and Department of Housing and Urban Development took an important step in making home ownership the American dream again. The FHA is being asked by many in the real estate industry to next eliminate “life of loan” mortgage insurance.
This means borrowers are required to maintain mortgage insurance on an FHA-insured property regardless of their equity position, while borrowers with traditional mortgage insurance can typically extinguish their mortgage insurance once they reach 20 percent equity in the property.
Here in the greater Phoenix area, a market that’s been named #1 in the nation for homeownership in 2017, this is great news and a program we will be utilizing for our buyers and borrowers moving forward.