The Government Has Just Suspended Action That Would Have Made Mortgages More Affordable
Fewer people are buying houses , and this may have something to do with reimagining the American Dream, but also because for many, housing is simply not available . To address this problem, the Federal Housing Administration (FHA) announced a program that would make FHA-backed mortgages more affordable for borrowers. The Department of Housing and Urban Development has just phased out this program.
FHA-backed mortgages are not ideal , but they are designed to make home ownership more affordable for those who qualify. Interest rates on FHA loans are usually much lower than traditional lending rates. The problem is that FHA loans require a mortgage insurance premium for the life of the loan. This insurance basically covers the lender’s ass in case you defaulted or buy out your home. Obviously, this monthly cost could partially offset the availability of a lower rate (yes, there is still a separate upfront premium).
The FHA planned to launch a program that would reduce the annual mortgage insurance premiums on new FHA-backed loans by 0.25 percentage points. In short, it would make loans more generally available. But just hours after the new administration was sworn in in the White House, the FHA announced that it was suspending the program:
According to the report, this reduction is “suspended indefinitely.” As we enter a new political era, this serves as an important reminder to be aware of changes and be prepared for how they may affect your own plans, financial or otherwise.
To find out more about the suspension, follow the links below.
Lender Letter 2017-07 (PDF) | Department of Housing and Urban Development