Great News for First-time Home Buyers!

Reduced FHA Mortgage Insurance Premiums to JUMP start 2015 Spring Home-Buying Season

In a January 7th speech in Phoenix, AR President Obama announced some significant improvements to mortgage loans backed by the Federal Housing Administration (FHA).

“Buying a home has always been about more than owning a roof and four walls. It’s about investing in savings and building a family and planting roots in a community.”

The President used the speech to address a subject of much consternation among borrowers and loan officers – FHA mortgage insurance premiums. They announced that some welcomed relief was on its way with the reduction of the FHA Mortgage Insurance Premium (MIP) from 1.35% to .85% on both purchase and refinance loans.

“I want to talk about helping more families afford their piece of the American dream, and that is owning their own home.”

The improved MI premiums go into effect with FHA Case Numbers originated after Jan. 26th, 2015.

The White House estimates more than 800,000 homeowners stand to save on their monthly mortgage costs and the reduced MI premiums will bring as many as 250,000 potential buyers into the homeownership market over the next 3 years.

The improved MI premiums go into effect with FHA Case Numbers originated after Jan. 26th, 2015.

The White House estimates more than 800,000 homeowners stand to save on their monthly mortgage costs and the reduced MI premiums will bring as many as 250,000 potential buyers into the homeownership market over the next 3 years.

According to housing data provider CoreLogic, the reduced MI will benefit FHA borrowers $900 per year ($80 per month) on average. See How Much YOU Can Save!

The President’s measures aim to address a flagging interest in owning a home from the first-time homebuyer demographic that is mostly being driven by Millennial indifference to their parents American Dream.
The lush green yard. white picket fence and peaceful suburban cul-de-sac is of little interest to a large swath of this generation of first-time homebuyers.

In fact, first-time buyer participation crawled into 2015, accounting for a meager 33% of the overall homes sold. That is the lowest market share since 1987 and down from 47% in 2009 and 50% in 2010.

HUD clarified the initial announcement in Mortgagee Letter 2015-01 by outlining the dates that changes take effect and the process for borrowers with a case number assigned before the launch.

Mortgage Lenders will temporarily be allowed to cancel FHA Case Numbers issued before that date so that in-process mortgage applications can benefit from the reduction.

Specifically the letter states: “To allow mortgagees to obtain the reduced annual MIP rates contained in this ML for loans in process with active FHA Case Numbers, FHA will temporarily approve cancellation requests for active FHA Case Numbers within 30 days of the effective date of this ML.”

Not waiting until January 26th is advised. With interest rates where they are, it promises to be a very busy first quarter for mortgage lenders. Especially those dedicated to first-time homebuyers.

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