Two weeks ago, the Federal Housing Administration (FHA) announced that all FHA-backed mortgages to close on or after January 27 would have a .25% reduction in mortgage insurance premiums. As of last Friday, however, the Department of Housing and Urban Development has suspended these rate cuts indefinitely.
The announcement was made only one hour after President Trump’s inauguration last week. According to HUD’s official announcement, the rate cut has been suspended for the following reason:
FHA is committed to ensuring its mortgage insurance programs remains viable and effective in the long term for all parties involved, especially our taxpayers. As such, more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.
For all FHA borrowers currently browsing the housing market, this means you should expect to pay the same premium rate for mortgage insurance that you would have paid since January 2015. Basically, you’ll now end up paying an upfront insurance fee plus .85% of your total loan amount for premiums each year.
According to several mortgage experts, this suspension may have a serious impact on the housing market, as lower mortgage insurance premium costs were an offset to today’s rising interest rates. Although many are disappointed about this recent suspension in premium cuts, it’s important to remember that most potential homebuyers have several mortgage options to consider—and your local lender is always ready to assist you. In some cases, the decision may likely depend on the borrower’s credit score, according to Tim Manni, mortgage expert at NerdWallet.
If you’re a borrower with poor credit, then Manni suggests “an FHA loan is likely to be your only option. Since Obama’s reduction hadn’t yet gone into effect, it simply means it’s back to business as usual in terms of what an FHA loan will cost you. The reduction was slated to save new FHA borrowers about $42 a month in the first year. That amount should not be a make-or-break number for any homebuyer. If you’re in the process of applying for a mortgage and your housing costs leave you little financial wiggle room each month, you need to adjust the amount of income you’re dedicating to your home loan and shop for cheaper homes.”
Of course, these are both very brief suggestions. For more information on which mortgage options would best fit your needs, or to learn more about home financing, contact one of our mortgage specialists today.
