Biden admin cuts some mortgage fees amid housing affordability crisis

The Biden administration announced Wednesday a change that will save an estimated 850,000 home buyers — primarily low- and middle-income and first-time buyers — an average of $800 on home financing costs this year.

The move affects mortgage insurance premiums paid by new borrowers who take out loans insured by the Federal Housing Administration. It will reduce the annual premium from 0.85% to 0.55%.

The FHA does not directly issue loans, but rather regulates and insures loans from private lenders that come with advantages for would-be homebuyers with smaller down payments and lower credit scores. FHA loans allow for down payments as low as 3.5% and allow borrowers to have lower credit scores than most conventional loans.

Outsized impact on new homebuyers and buyers of color

Improving rates on mortgage insurance will have an outsized impact on new homebuyers and homebuyers of color, according to HUD and the White House.

More than 80% of FHA borrowers are first-time homebuyers, and over 25% are homebuyers of color. The average home purchased with FHA-insured mortgages is about half the price of the national median home and has an average mortgage amount of less than $270,000.

In areas where home prices have shot up, the savings will be greater: For example, a home purchased in Phoenix with a $400,000 mortgage will save the buyer $1,200 per year and a home bought in Austin with a $500,000 mortgage will result in a $1,500 per year saving, according to the administration.

https://www.cnn.com/2023/02/22/homes/biden-housing-fha-insurance/index.html