What the Suspension of the FHA Mortgage Insurance Cut Really Means for Borrowers

In early January 2017 it was announced that the government would be implementing a rate cut to the FHA mortgage insurance premiums. However, as of January 21, 2017 this has been put on hold.

Now, before any panic sets in, it’s important to fully understand what this means, who is most affected by it and what your options are.

What is the FHA and mortgage insurance premium?
The Federal Housing Administration is a government agency that insures home loans and collects fees from borrowers to reimburse lenders in the case of default. FHA programs are typically aimed at first-time home buyers who do not have a large down payment (as low as 3.5%), and/or those who may have had credit problems in the past and are rebuilding. Due to the riskiness of taking a lower down payment and potentially lower credit, the borrower is charged an insurance premium as a percentage of their loan amount. By lowering the mortgage insurance rate, borrowers would have seen a decrease in their overall monthly payment, as well as more buying power in purchasing the home of their dreams.

So what does this mean for borrowers?
Well, in the simplest terms, things are now just staying status quo! So if you’re out shopping for a home and planned to use an FHA loan, you’ll be paying the same premium rate for the mortgage insurance that you would have been before the rate drop announcement. Yes, we know you won’t be seeing a savings in terms of a lower insurance payment, HOWEVER, with rates still at historic lows you can get a great low mortgage rate which will keep you mortgage payment low.

What are your options?
Depending on your specific situation, Poli Mortgage offers a number of different loan programs that meet the needs of first time home buyers, buyers with a low down payment and borrowers with low to fair credit scores. With our rates and closing costs so low, it can help offset the larger mortgage insurance premium you’ll need to pay and provide you with more buying power to get into your dream home.

Contact a loan specialist at 866-353-7654 to discuss which loan program may be the best option for you.