Representative Karen Bass (D-Calif.) is pushing Congress to adopt her new bill that aims to lower the costs of obtaining an FHA loan. Many home buyers are trying to avoid FHA these days, because the cost of the FHA PMI has surged in recent months.
Back in April, the FHA’s upfront PMI charges increased from 1% to 1.75%. On a $200,000 loan, we’re talking about an increase of $1,500. Many of the folks who are looking for a FHA Streamline (to lower payments) are disappointed that they had their loan endorsed after May of 2009, because this higher FHA PMI makes it difficult to save money!
The higher FHA PMI fees were put in place to bolster the FHA’s capital reserves, which were drained as a result of the ongoing mortgage crisis.
But clearly this has made FHA loans a lot less attractive to first-time homebuyers, many of which rely on the agency’s signature low-down payment loan program, which requires just 3.5% down. The other GREAT thing about the FHA Loans is that the 3.5% can be a GIFT or you might qualify for a $8000 Grant from the Government!!
Enter the Homeownership Preservation Education (HOPE) Act
To offset some of these new costs, Bass has proposed new legislation, namely, the “Homeownership Preservation Education (HOPE) Act.”
In short, it provides a 0.25% reduction on the FHA upfront mortgage insurance premium for first-time homebuyers who complete a HUD-approved housing counseling course. On that same $200,000 loan referenced earlier, a borrower would save $500 in closing costs, making homeownership a little less painful.
The general thinking behind the bill is that more educated homeowners default less often, which reduces foreclosures and losses for the FHA. As a result, these types of buyers should be able to catch a break on the costly upfront mortgage insurance premium. Of course, because it’s such a minimal discount, it probably won’t make or break a prospective homebuyer’s decision to purchase a property.
Unfortunately it doesn’t carry a provision for homeowner’s looking for a FHA Streamline Program… I seems to us that if you’ve made your payments on time for a few years – you should be able to get a break too!
Have questions about Qualifying for a FHA Mortgage, or the First Time Home Buyer Programs available in NC? Call Steve and Eleanor Thorne 919 649 5058 – we’d love to give you a quote for today’s best mortgage rates!