Consumer Alert: On March 20, your mortgage payments may be cheaper than you think
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ROCHESTER, N.Y. – Today’s consumer alert is a bit of good news for those hoping to buy a home. If you’re considering an FHA loan, your mortgage payments are about to get cheaper. And it’s significant, so much so, for some, home ownership may now be within reach. It’s because of a move by the Biden Administration last week regarding FHA loans. Those are loans backed by the federal government. And because they’re government-backed, they’re easier to get for folks who are lower income or don’t have a spotless credit record.
The down side to an FHA loan is the interest rates are a bit higher, and you have to pay mortgage insurance premiums which drive up the cost of your monthly mortgage payment. Now consider the fact that the FED has raised interest rates eight times since early last year. So now your average interest rate for an FHA loan is more than 7 percent. And for many, that puts home ownership out of reach. So the White House is trying to lower your monthly mortgage payment by lowering your mortgage insurance premiums from .85 percent, the rate for most, to .55 percent of your loan amount.
Here’s how that will affect you. Right now in Rochester, NY, the median listing price is about $135,000 according to rockethomes.com FHA loans require you to put down 3.5 percent. That’s $4,725. That means you’ll finance around $130,275, plus a few thousand for closing and required up-front costs.
Under the old terms, your annual mortgage insurance premium or MIP, would be $130,275 X .85% which is just over $1,107 annually. But starting March 20th, the new premium will be .55%, bringing your annual mortgage premium down to just over $716, saving you almost $400 annually.
Today's consumer alert is a bit of good news for those hoping to buy a home. If you're considering an FHA loan, your mortgage payments are about to get cheaper. And it's significant, so much so, for some, home ownership may now be within reach. It's because of a move by the Biden Administration last week regarding FHA loans. Those are loans backed by the federal government. And because they're government-backed, they're easier to get for folks who are lower income or don't have a spotless credit record.
And according to Homebuyer.com, Rochester is number nine in its list of the most affordable places to buy a home. All that is good news for folks in the market for a house.
Remember these numbers are based on averages – the average mortgage rate, the average MIP rate, etcetera. And I know what you’re thinking. If I already have an FHA loan, will my premiums go down too? Nope, not unless you refinance. And if you bought your house when mortgage rates were dirt cheap, it’s not wise to refinance now.