What Does the Change in FHA Insurance Premiums Mean for YOU?

One of the first things President Trump did after taking office is reverse the FHA Insurance Premium cut that President Obama made in the last days of his presidency. There is definitely controversy about how much this will affect people who get FHA loans, here's how it may affect YOU.

First, a little about FHA Mortgages:  The Federal Housing Administration insures some mortgages against foreclosure - this means the mortgage company will not be out money if the homeowner defaults on his or her loans. This mortgage has been used mainly by lower income families and families with less than desirable credit scores. The premiums for this insurance are paid for by the homeowner as part of their monthly mortgage payment. 

Days before leaving office, President Obama reduced the premiums for FHA insurance from 0.85% to 0.6%, which, put in context, would save someone around $500 in the first year if he/she had a $200,000 mortgage.

President Trump's Administration argues that this reduction, over the long term, could put undue financial responsibility on all taxpayers as a whole.  Because this is a government program, when the revenue from premiums cannot cover the full amount of all foreclosed mortgages, taxpayers have to pick up the tab. Some people even argue whether FHA mortgages are necessary at all, stating that people who may not be able to pay for their mortgage shouldn't actually be approved for one. 

Our thoughts: At Hinton Real Estate Group, we encourage our clients to have a healthy financial situation and know what they can afford before seriously starting the home search. This change in Insurance Premiums isn't really a change after all, it's just putting them back to what they were before President Obama's last minute change. 


Forbes Article: Trump Admin's First Action - Suspend The FHA Insurance Rate Cut

Washington Post's Article: Trump takes away FHA mortgage insurance premium cut not long after being sworn into office


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