Article By: Jim Porter – March 6, 2023
Well, how do you like that! Thanks to the Daily Republic, the National Association of Realtors, the Mortgage Bankers Association and other consumer advocacy groups fighting for the working class and the American Dream, HUD secretary Martha Fudge and the Biden administration finally announced a 30-basis point reduction in the annual mortgage insurance cost for FHA loans this past week.
This is a good step in the right direction, and after many articles written by me over the years criticizing the state and federal government, I have to say, I commend and appreciate this move.
The next thing they need to address is the nonrefundable 1.75% up-front mortgage insurance premium HUD charges on FHA purchase money loans. I suppose they can justify this high fee in exchange for the risk associated with a loan that only requires 3.5% down and HUD’s willingness to take on lower credit scores and higher debt ratios than conventional loans and private mortgage insurance (PMI) companies, but it doesn’t seem fair that homeowners that sell or refinance the house and pay off the FHA loan during the first one to five years don’t get any refund of the unearned insurance premium.
This new 30 BPS reduction in FHA mortgage insurance will save a homeowner that needs a $500,000 mortgage $125 per month, which is better than a sharp stick in the eye, but now we need the Fed to stop raising rates because first-time homebuyers can handle 5.5% to 6% but 7% is tough.
This improvement in affordability should motivate homeowners that have outgrown their 1,200-square-foot starter home to list their home for sale and move up to 2,000 square feet. There is no shortage of first-time FHA buyers pre-approved to buy homes under $600,000. The market needs more homes listed for sale to meet the demand ASAP.
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
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