Finally some improvement on FHA monthly mortgage insurance premiums for home buyers. Mortgage insurance fees will drop to .85 percent toward the end of January, according to The White House. The reduction in fees is geared toward jump-starting the housing market.
The “annual premiums” on FHA loans, an especially popular source of financing for first-time home buyers, have increased five times since 2010. They jumped from .55 percent of a loan’s value to 1.35 percent. The White House projects the lower premiums will entice 250,000 buyers to take out FHA loans in the next three years, and that the new borrowers will save an average of $900 annually. See Washington Post article.
Conventional loans may still be more attractive to well-qualified buyers with 5% or more down payment, but with these changes FHA may become appealing once again to first-time buyers and buyers with less-than-excellent credit. The change also makes FHA financing competitive with the new Fannie Mae 3% Down program.
The current rate on an FHA 30-Year loan is 3.500% (!) and the FHA loan limit for the DC area remains at $625,500.