All Posts Tagged: President Obama
First-time homebuyers received welcome news last week when President Obama announced a 0.5% cut in annual mortgage insurance premiums on loans from the Federal Housing Administration (FHA), which are designed primarily for first-time buyers.
Homebuyers with FHA loans will save an average of $900 annually through the lower fee, according to the FHA. The FHA estimates that cutting its fee to 0.85% of the loan balance from the current 1.35% will spur 250,000 new homebuyers to purchase their first homes over the next three years.
This is one more positive move to make homeownership more accessible as the U.S. economy strengthens. Prospective homebuyers may want to talk to a lender about the reduced fee and explore all their options for low-down-payment mortgages.
Recently, Fannie Mae and Freddie Mac increased their loan-to-value limits to 97% — meaning qualified homebuyers could receive a mortgage with as little as 3% down. That was positive news for qualified first-time homebuyers and others. On a $200,000 home, that’s a down payment of just $6,000, as opposed to a 20% down payment of $40,000.
The reduction in the FHA fee is another step toward making credit more affordable for qualified buyers — primarily first-time buyers.
FHA had been at somewhat of a disadvantage compared to Fannie Mae and Freddie Mac after they began offering 97% loan-to-value mortgages. FHA’s maximum is 96.5% loan-to-value, requiring at least a 3.5% down payment. President Obama’s half-a-percentage point cut in the FHA fee makes these loans more competitive again and a good option for first-time buyers to consider.
Also, credit qualifications on FHA loans for first-time homebuyers can be more liberal than the requirements on a high loan-to-value Fannie Mae or Freddie Mac mortgage combined with private mortgage insurance, depending on your individual credit profile.Read More ›