FHA fee cut cancelled – at least for now

On January 9th, HUD announced a cut in the annual (monthly) mortgage insurance fee – it was going from .85% to .60% effective with closings on January 27, 2017. It would save borrowers about $21 on every $100,000 borrowed.  Shortly after the inauguration of President Trump, the new administration announced  that it was rescinding that cut – at least for now.  None of us really know why the cut was announced and then taken back – but for now, FHA fees stay where they were!

What does that mean going forward?  Should you wait to see if HUD does reduce the fee in 2017? Is there a chance that HUD may do that? The answer is possibly – but I would not wait for the fee to decrease.  FHA needs to have a congressionally mandated cash reserve of 2%. They have that now – there were a few years where they didn't have it.  For now, they have met the reserve requirement which is why there is a chance that after the new administration reviews numbers, we may see a decrease in the mortgage insurance.  However, we also expect interest rates to increase this year and home prices have also been increasing. If you wait to see if there is a decrease, you may lose buying power based on an increase in interest rates and/or an increase in home prices.

The current FHA mortgage insurance is still lower than it was for a few years.  FHA rates tend to be lower than conventional rates, so for many buyers, FHA is still a great way to finance a home.  For many buyers, the monthly payment may be lower than a conventional loan and with a minimum down payment of 3.5% and the ability to have a credit score as low as 580, FHA is a great way to buy a home now.

Check with your loan officer and see what you can qualify for with an FHA loan – you may be shopping for a new home sooner than you think!!

 Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, Inc, An Equal Housing Lender, NMLS#150953 - Email - Website

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Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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