President Barack Obama announced Wednesday, the Federal Housing Administration (FHA) will cut the cost of mortgage premiums, allowing a quarter of a million Americans who have been shut out of the housing recovery to take advantage of these reduced mortgage payments.
The president’s plan will reduce annual FHA fees to 0.85 percent of the loan balance from 1.35 percent at the end of the month. The typical first-time homebuyer will save about $900 in their annual mortgage payment, according to the FHA.
The Obama administration expects the reduced mortgage payments to give a boost to homeownership for borrowers with lower credit scores. Some 800,000 FHA borrowers are estimated to take advantage of these lower rates in the first year, saving millions of dollars in total.
As well, first time homebuyers who are struggling to get a mortgage in the existing tight credit market will be in a better position to take advantage of the reduced cost. The lowered premiums are expected to create opportunities for 250,000 new homeowners to purchase a home over the next three years.
The administration also plans on taking additional steps to get rid of red tape and clarify lending standards in the upcoming period.
