Homeowners may save thousands of dollars on their home mortgages!
In January, the Federal Housing Administration (FHA) announced a policy change that could save homeowners thousands of dollars on their home mortgages. The annual personal mortgage insurance (PMI) premiums will be reduced by 50 points.
What is Personal Mortgage Insurance?
Personal Mortgage Insurance (PMI) is an added safeguard for financial institutions who loan money for housing with little investment from the buyer. Generally, PMI is required when the down payment amount is less than 20% of the property value. The insurance premium is added to the base value of the mortgage and paid monthly along with the premium and interest.
In an effort to ensure responsible lending to creditworthy borrowers, the annual rate for PMI will drop to 0.85% from 1.35%. This may also be beneficial for renters to find housing at a lower monthly fee. For the typical first time home buyer, the reduction in PMI could mean as much as a $900 savings each year.
Will This Change In PMI Policy Affect Those Who Already Have a Mortgage?
For those homeowners who have recently obtained an FHA, they will see an immediate change in their monthly mortgage payments. The savings will amount to $41.67 per every $100,000 borrowed. When you consider that amount applied to the number of months a homeowner is obligated to make the PMI payments, the savings from the reduction are significant. Speak with Sean Z Mortgage today to find out if refinancing your existing mortgage will give you access to the reduced PMI rates.
This reduction is not only a positive move for the homeowner with an FHA loan, it is an excellent move to help in stimulating the housing market. The one criticism that these types of loans have traditionally received was the high insurance premiums that came with the advantage of a low down payment. With this reduction in rates, a home owner can put down 5% or 10% and not have to pay for that benefit with high insurance premiums.
Can This Change Help You Become a Missouri Homeowner?
If you have been making plans to buy a home in Missouri but do not think you are financially ready, bring your concerns to the Sean Z mortgage team who can help you make a viable plan to home ownership and even help you decide if you are ready now. There are a variety of FHA loans available and you may qualify for one right now.
With some FHA loans, you can be approved with a deposit as low as 3.5% and a credit score of 580. That is a big difference from the 640 or better that many banks insist on. Closing costs are also a concern with a first-time home buyer, but with some FHA loans, the seller is allowed to pay up to 6% of that cost. This could give the buyer extra money to cover the costs of moving and setting up a new home.