Recent policy changes from FHA, Fannie Mae and Freddie Mac are intended to make homeownership a more attainable goal for first-time homebuyers. What are the changes and what difference will they make? For those planning to enter the housing market for the first time, the right opportunity may come sooner than expected due to more favorable guidelines and lower costs.
More Affordable Private Mortgage Insurance
FHA loans have become more affordable in 2015. Effective January 26, 2015, FHA reduced its annual mortgage insurance premium rates by .50% for most new mortgages. (Private mortgage insurance (PMI) is required for all FHA loans and any home loan with a down payment lower than 20%). What does this mean to you? More opportunity to achieve homeownership. The premium reduction is estimated to save the average homebuyer about $80 on their monthly payment or approximately $990 a year. This is a substantial savings over the life of the loan. In addition, those who currently have an FHA loan may be eligible to refinance and save with lower payments. The reduction in mortgage premiums may also present more options by allowing buyers to qualify for a larger purchase price.
With a low down payment requirement (3.5%), easier credit score requirements than conventional loans, and the new, more affordable mortgage insurance premiums, FHA loans remain a viable option for those new to the housing market.
Lower Down Payment Guidelines
Fannie Mae and Freddie Mac recently adopted new guidelines for down payments. The change enables some buyers to qualify for a home loan with a down payment as low as 3%. This is down from a minimum of 5%.
In a recent statement, the White House said the changes were part of efforts “to expand responsible lending to creditworthy borrowers.” The policy changes make it clear that buyers have more options. The 20% down payment requirement is becoming a thing of the past for many. Regulations are shifting in favor of the first-time homebuyer. Now is an ideal time to assess your financial situation and explore opportunities to make homeownership goals a reality. Contact a loan advisor who can guide you through the process.