Make Sense of the FHA Insurance Shuffle
Before Secretary Julian Castro left the US Housing and Urban Development (HUD) office, he reduced the annual premiums most borrowers pay by a quarter of percent. This change to loans guaranteed by the Federal Housing Administration (FHA) meant a reduction in the FHA's annual mortgage insurance premium by 25 basis points for many mortgages closing on or after January 27.
This was projected to save new FHA-insured homeowners about $500. However, the new administration suspended the price cut before it could go into affect.
Here in California this premium rate reduction would have saved new home buyers about $860 per year. Thus California is more negatively impacted than any other state, and as you know, we already have a major affordability issue here.
If you fall into the group whose buying power was significantly reduced because of this change, don't lose hope. Jonathan Smoke, chief economist at Realtor.com, shared a few alternative options that you could explore in an article earlier this year.
"First, see if you qualify for other loan programs that offer similar flexibility in underwriting to FHA. Two important options to explore are VA loans (available to active-duty military or veterans) and USDA loans (available in rural areas and some small towns and suburban areas)," Smoke wrote.
If your challenge is a low down payment, there are other routes besides FHA you could take. "If you have a credit score above 680, and ideally 700, you can likely qualify for a conforming mortgage with a low down payment option," Smoke added.
Another route is to look into down payment assistance and other ways to put more money down, which could lower your rate enough to offset the increased insurance premium.
Home ownership could still be within your grasp, so don't get discouraged. Ask you Realtor to connect you with a lender who can help you explore your options.
Both the California Association of Realtors and the National Association of Realtors advocate for lower FHA mortgage insurance premiums. Both organizations are committed to helping people with the dream of home ownership achieve their goals.