Great news for first-time homebuyers in the United States! The White House is rolling out a plan to reduce mortgage insurance fees charged to first-time home buyers, which could help an estimated 850,000 borrowers save about $800 a year on the cost of a typical loan.
Vice President Harris and Department of Housing and Urban Development (HUD) Secretary Fudge will travel to Bowie, Maryland, today to announce that HUD, through the Federal Housing Administration (FHA), will reduce its annual mortgage insurance premium by 0.30 percentage points, from 0.85% to 0.55% for most new borrowers. The mortgage insurance premium is the monthly fee that homeowners with FHA-insured mortgages pay to insure their mortgages, which they pay on top of their monthly principal and interest payments. White House Briefing Room
This is a huge win for those who are looking to purchase their first home in the near future.
The plan, which will be announced by Vice President Kamala Harris at an event in Maryland, will lower fees on Federal Housing Administration (FHA) loans.
The FHA charges these fees to insure lenders against riskier loans often taken out by lower-income homebuyers.
This announcement comes at a crucial time, as U.S..
Home sales dropped to their lowest level in over 12 years in January.
Inflation-driven interest rate hikes that pushed mortgage rates higher.
Making property unaffordable for first-time buyers.
With the government data showing a decline in single-family homebuilding and permits for future home construction in January, this plan couldn't have come at a better time. In recent weeks, the 30-year fixed mortgage rate has risen to an average of 6.32%, reflecting a spike in U.S. Treasury yields.
Over the last several years, FHA’s mortgage insurance fund has accumulated reserves at a level that is more than five times the required threshold set by Congress. This was made possible by HUD’s responsible and responsive management policies, home price appreciation, and significant refinance volume which together have led to an accumulation of substantial reserves. These dynamics make it possible for HUD to calibrate premiums more appropriately to the performance of the loans FHA insures and pass savings on to consumers in a responsible manner and without jeopardizing the long-term sustainability of FHA’s mortgage insurance fund. The premium reduction will take effect on March 20, and will be reflected in the President’s FY 2024 Budget. White House Briefing Room
These increases can make it difficult for first-time homebuyers to afford the home of their dreams.
The new plan may make it easier to achieve the goal of homeownership.
With the savings from reduced mortgage insurance fees, first-time homebuyers can potentially put that extra money toward other expenses associated with owning a home, such as furnishings or renovations. Additionally, the lower fees may make it easier for borrowers to qualify for a loan and obtain a more favorable interest rate.
If you are considering purchasing your first home, now may be the perfect time to start your search.
With the government's plan to lower mortgage insurance fees for first-time homebuyers, you could potentially save hundreds of dollars a year on the cost of your loan.
FHA loan in the United States
To qualify for an FHA loan in the United States, you will need to meet certain requirements. Here is a breakdown of what you need to know:
Credit score: The FHA requires a minimum credit score of 500 for all loans, but if you have a score of 580 or higher, you may be eligible for a smaller down payment.
Down payment: The FHA requires a minimum down payment of 3.5% of the purchase price of the home. However, if you have a credit score of 580 or higher, you may be eligible for a down payment of as little as 3.5%.
Debt-to-income ratio: The FHA has specific guidelines for the maximum debt-to-income ratio that you can have and still qualify for a loan. This ratio is calculated by dividing your monthly debts by your monthly income. To qualify for an FHA loan, your debt-to-income ratio must be less than 43%.
Employment history: The FHA requires that you have a stable employment history and are able to prove it with documentation. This includes proof of at least two years of employment in the same field or with the same employer.
Down payment assistance: The FHA allows you to use down payment assistance programs to help with the down payment and closing costs.
These programs are offered by state and local agencies, as well as non-profit organizations, and can provide you with the funds you need to buy a home.
Mortgage insurance: All FHA loans require mortgage insurance, which protects the lender in case you default on the loan. There are two types of mortgage insurance: upfront mortgage insurance, which is paid at closing, and annual mortgage insurance, which is paid monthly. The amount of mortgage insurance you will pay depends on the size of your down payment and your credit score.
Property standards: The FHA has strict property standards that the home you are purchasing must meet. These standards include things like the condition of the home, its location, and the amount of work that needs to be done. The FHA will send an appraiser to assess the property and ensure that it meets these standards.
Closing costs: The FHA allows sellers to pay up to 6% of the home's purchase price towards closing costs. This can help lower the amount of money you need to bring to closing.
Documentation: To apply for an FHA loan, you will need to provide documentation of your financial situation, including proof of income, employment history, and credit history. You will also need to provide the lender with copies of your tax returns, pay stubs, and bank statements.
Don't let rising interest rates deter you from achieving the American dream of homeownership. Take advantage of this opportunity and start your journey to homeownership today!