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