Rates dropping Homebuyers in Plymouth & Cape Cod and across the country will soon benefit from reduced mortgage costs. The FHA (Federal Housing Administration) recently announced they will reduce their MIP (Mortgage Insurance Payment) which is currently 1.35% of a loan to .85%.

    So as an example, on a $200,000 loan the monthly payment where the buyer is putting a down payment of less than 20% of the value of the home, the MIP payment will go from $225 monthly to $142 plus the cost of the lender financing for the loan.

Once the homeowner reaches 20% equity in the value of the home the mortgage insurance stops. The FHA’s action is likely the result of competition for these loans where other government agencies such as Fannie Mae and Freddie Mac also provide products.

FHA loans are not made directly to consumers but sold as insurance to lenders and paid by buyers as part of their mortgage payments. For first-time-buyers, those with small down payments, maybe some credit or debt issues, the FHA is typically the only game in town.

It will expand homeownership to those who qualify and ease some of the burden on monthly payments. Typically these loans are for those putting down 3.5% to 5% allowing them to buy a home. Any savings on monthly outlay will help the housing market by bringing more buyers to the table. To be sure, it is a smaller segment of the market but housing can use all the help it can get.

    For more information talk to your Lender or Mortgage Broker.

 

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