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Friday, January 23, 2015

FHA loans getting cheaper

Guest Blogger: Today's post is written by Sacramento Mortgage Expert, Matt Gouge.  All of his contact info and more can be found at this website: www.mattthemortgageguy.com. Thank you Matt for providing this great info for potential buyers in our Sacramento Real Estate Market.

FHA’s reduction of mortgage insurance premium – What does that mean?

When you heard the announcement that FHA will reduce its annual mortgage insurance premiums from 1.35% to 0.85% it sounded good, but perhaps you don’t know what that really translates to. Allow Matt The Mortgage Guy to simplify it.
The purpose of an FHA-insured loan is to encourage home-ownership, even among people who may have small down payments or poor credit. It does so by federally insuring the loan, which defrays some of the risk from the lending institution. With this extra risk they take on these loans they charge an annual mortgage insurance premium (MIP).

Here is an example of the change*:
Pre-change: If you borrow $250,000 using an FHA loan your annual MIP (1.35%) would be $3375  ($281/mo)
Post change: You borrow the same $250,000 with an FHA loan but your annual MIP (0.85%) is $2125  ($177/mo)

It may not seem like a huge deal but for folks buying their first home or bouncing back from the market crash, this $100/mo could be the difference between renting and buying.

This change, in my opinion, was long overdue. In order to support the housing markets recovery FHA needs to make their loans affordable to those who utilize this financing option. This is another step in the right direction and one that will help millions of homeowners in the coming years. Good on you FHA!

If you or someone you know is looking into buying and you want to know all of your options, (many of which require very little down payment), I encourage you to reach out to a mortgage professional. You may be surprised to learn that you are ready to take that exciting leap of becoming a homeowner.

*Effective January 26, 2015

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Thanks again Matt for your guest blog post.

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clear skies,
Doug Reynolds




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