FHA Reduces Mortgage Insurance Premiums to Help Buyers

In an effort to help housing become more affordable for buyers, the Federal Housing Authority (FHA) announced recently that mortgage insurance premium rates will be lowered by 0.5 percentage points. This comes as good news to buyers who were previously priced out of purchasing a home through FHA-backed loans.

The National Association of Realtors (NAR) estimated that 400,000 creditworthy buyers were unable to purchase a home in 2013 due to mortgage insurance premium rates. The rate is now 0.85 percent, down from the previous 1.35 percent. According to Mark Zandi, chief economist at Moody’s Analytics, the decrease could save the average borrower $1000 per year on a $200,000 home loan.

This news comes on the heels of a recent announcement by Fannie Mae and Freddie Mac that they will now allow three percent down payments on home mortgages for creditworthy buyers who meet specific requirements.

In late 2014, NAR released a report showing that first time homebuyer numbers fell to a 30 year low of only 30 percent of all buyers for the year. Experts cited affordability, debt, and the high cost of FHA loans as well as high down payment requirements. These recent changes signal a change in opportunity for many lower income and first time buyers that a home purchase may no longer be out of reach.

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