White House unveils plan to lower mortgage costs for first-time home buyers
CHICAGO - The White House unveiled a new plan Wednesday to lower first-time home buyers' mortgage costs which officials say could save borrowers about $800 a year.
With mortgage rates skyrocketing over the past couple years, the goal of the reduction is to make buying a home just a little more affordable.
"It will help some of those people who are trying to qualify to become a homeowner possibly be able to get over that line into homeownership," said FHA Commissioner Julia Gordon.
The White House announced that the Federal Housing Administration will reduce its annual mortgage insurance premium rate from 0.85% to 0.55%.
That's the insurance many home-buyers are required to pay if they're putting down less than 20% on their loan.
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That means if you're taking out a mortgage of $270,000, which is the national average, you'll save about $800 a year on the FHA insurance.
"We really want to help everybody gain those advantages of homeownership. That stability for your family. That ability to build equity in a home," Gordon said. "We really try to reach communities of color who have much lower rates of homeownership than white communities."
The White House estimates the lower rates will help about 850,000 low and middle-income home buyers, including thousands in the Chicago area.
"So we really do see people who come in, they may not only be buying their own first house. They may be the first person ever in their family to buy a house. We really try to reach communities of color who have much lower rates of homeownership than white communities," Gordon said.
"The interest rates have definitely pumped the brakes for a lot of folks. A lot of people are concerned," said Mike Del Preto, a Chicago-based mortgage broker.
Del Preto said the lower insurance rates should help people who make enough money to afford a monthly mortgage payment, but don't have the cash reserves for a big down payment.
"It's going to help whether you have a 620 credit score and you have to go FHA because that's your best option rate-wise, or you got a 780 credit score and you're buying a multi-unit and the only option is a .5% down payment. It's gonna help you too."
The best place to start is by checking out the Department of Housing and Urban Development website or the Consumer Financial Protection Bureau and talking to a mortgage broker.