In February 2023, the Biden-Harris Administration announced an action that will save homebuyers and homeowners with new FHA-insured mortgages an average of $800 per year, lowering housing costs for an estimated 850,000 homebuyers and homeowners in 2023.
The Federal Housing Administration (FHA) will reduce its annual mortgage insurance premium by 0.30 percentage points, from 0.85% to 0.55% for most new borrowers. The mortgage insurance premium is the monthly fee that homeowners with FHA-insured mortgages pay to insure their mortgages, which they pay on top of their monthly principal and interest payments.
Homeownership is currently the principal source of wealth creation for most American households. However, due to the increase in mortgage rates, a nationwide shortfall in the supply of affordable homes and shifting demand for housing during the pandemic, first-time homebuyers have struggled in recent years to achieve homeownership.
This action is intended to be an important step in making homeownership more attainable. FHA-insured mortgages, which accounted for 7.5% of home sales in the third quarter of 2022, are targeted at homebuyers who otherwise may not be able to achieve homeownership. This cost-lowering measure will make buying a home more attainable and affordable for more low- and middle-income borrowers.
FHA insures loans with a small down payment and more flexible underwriting, enabling families to begin building wealth through homeownership earlier than they otherwise might and providing an open door to credit-worthy borrowers.
The average home purchased with FHA-insured mortgages cost around half the price of the overall national median home and have an average mortgage amount of less than $270,000. By lowering its annual mortgage insurance premium by 0.30 percentage points, FHA’s action hope to help new homebuyers all over the country achieve homeownership.
If you feel that this reduction in FHA insured mortgage premiums might affect you, please reach out to your LMC tax professional for further guidance.
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