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Do you plan to buy a home in Washington in 2023, using an FHA loan? If so, there’s some good news you should know about.
Federal housing officials recently announced that they will be reducing the annual mortgage insurance premium for FHA home loans. This change could save Washington borrowers hundreds of dollars per year, by reducing one of the recurring expenses associated with FHA loans.
Last week, officials from the Department of Housing and Urban Development (HUD) announced they would be lowering the annual mortgage insurance premium for FHA loans. This change will take effect in March 2023.
The annual premium for most borrowers who use this program will drop from 0.85% of the base loan amount down to 0.55%, starting in March.
According to the following statement from Julia Gordon, Assistant Secretary for Housing at HUD, this change could benefit Washington first-time home buyers in particular:
“At a time when budgets are tight and homeownership is out of reach for too many, FHA’s premium reduction will allow more households to access the stability and wealth creation of homeownership, particularly the first-time homebuyers and families of color who rely heavily on affordable FHA-insured mortgages.”
FHA loans are insured by the Federal Housing Administration, which is part of HUD. This program requires borrowers to pay mortgage insurance premiums (MIPs) to protect the lender in cases of borrower default. This insurance protection benefits borrowers by allowing for a smaller down payment and more flexible qualification criteria.
These two premiums help to fund the FHA loan program. Without them, this program would cease to exist. So while they do increase the size of your monthly payments, they offer certain benefits as well. They help to sustain a program that many home buyers in Washington state rely on, year after year.
HUD officials estimate that this reduction in FHA mortgage insurance could save homeowners nationwide an average of $800 per year. But that’s based on national price data.
Here in the state of Washington, the median home value is quite a bit higher than the national median. This means that home buyers in Washington who use FHA loans could save even more money, once the reduced mortgage insurance premium takes effect.
Based on the current median home price for our state, a typical borrower uses an FHA loan might save $1,000 or more per year due to the reduced premium. At a time when prices seem to be rising on almost everything, this policy change could make the FHA loan program more popular among budget-minded buyers in Washington.
An FHA loan is one example of a government-backed mortgage. The government offers some insurance protection to the lenders who issue these loans, reducing the risk associated with borrower default.
As a result, lenders are able to offer more flexible credit criteria, compared to conventional loans. It’s typically easier to qualify for an FHA loan, when compared to a “regular” conventional mortgage product.
This program also allows home buyers in Washington to put down as little as 3.5%, when buying a house. This is largely what makes FHA loans popular with first-time buyers in Washington.
To be clear, this program is not limited to first-time buyers. But it’s often well-suited for such borrowers due to the low down payment requirement. First-time buyers do not have the proceeds from a previous sale to put toward their purchase. So they often struggle with the down payment. The FHA loan program helps to ease this burden and clears the path to homeownership.
FHA loans can be a confusing subject for homeowners. That’s partly due to the government rules and requirements that apply to this program. If you have questions about using an FHA loan to buy a house in Washington, please contact our staff.
Sammamish Mortgage has been helping home buyers and homeowners across the state of Washington for many years. We offer a broad range of home loan options, including the popular FHA program.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.