President Obama’s executive action reducing the mortgage insurance rate (PMI) for FHA loans will help reduce the cost of ownership. In particular First Time Home Buyers get reduced rates of .25%, which could end up saving them thousands of dollars over the life of the loan’s PMI. The rate is set to be reduced from 1.35% of the loans value to 0.85% of the loans value.
How much will the loan insurance reduction save me?
According to the Federal Housing Authority the reduction in the cost of PMI will save the typical FHA home buyer $900 per year. Since most FHA borrowers pay PMI for 3 years this is a total savings of about $2,700.
Will this help the housing market?
The housing market has slowed down, with fewer sales in the closing months of the year. This move is said to bring 250,000 new first time home buyers into the market. This is important because the constant flow of first time buyers enable current homeowners to buy up and perpetuate the house buying domino effect. With tighter credit requirements, increasing home values, and stagnant wages it is harder now for first time home buyers to purchase. With interest rate hikes on the horizon any move that lets first time home buyers get reduced rates on loans is positive for the real estate market.
How do I qualify for the reduced rate?
To qualify for the reduced rate you need to contact a loan officer or mortgage broker and make sure that you are pre-approved for an FHA loan. Then contact a Realtor who can help you find an FHA approved home to buy. If you are looking to buy your first home in Cincinnati call me, and we can set up a time to talk about your home buying needs.
At The Alison Moss Group, Cincinnati is more than a city to us–it’s our hometown. Since launching in 2008, our clients have depended upon us to lead them through the home buying and selling journey. We are the go-to resource for all of your needs before, during and after the sale of your home.