Last week the Federal Housing Administration, an arm of HUD (the department of Housing and Urban Development) announced a new “Blueprint for Access” that, if implemented, should lower the cost of having an FHA loan as well as make getting an FHA loan a little easier for some home buyers.
The biggest thing here is the HAWK (Homeowners Armed With Knowledge) program which, in exchange for the home buyer sitting through a short homeowner education course, will cut the historically high FHA mortgage insurance premium factors.
Generally speaking FHA loans are great. They tend to have lower rates than conventional loans and are easier to qualify for and get closed. The big issue with FHA is the mortgage insurance and how much it can increase a homeowner’s monthly payment.
However due to the housing “crisis” and recession tied to it HUD had to increase the FHA’s cost of borrowing to re-fund its MMI fund (Mutual Mortgage Insurance fund, which losses on FHA loans are paid to lenders from) that had taken a hit due to defaults and foreclosures in 2008-2012. HUD increased both the up-front fee collected on FHA loans (UFMIP) as well as the annual premium that is paid monthly by FHA borrowers as part of their monthly payment to all-time highs; making new FHA loans more expensive than at any time in their history, despite having lower rates than conventional loans.
The HAWK program will reduce the UFMIP by 50 basis points ($1,750 on a $350,000 FHA loan) as well as the annual MIP by 10 basis points ($30 a month on a $350,000 FHA loan).
For those willing to take additional homeowner courses after closing and make on-time payments for the first two years of the loan FHA will reduce the amount of the annual MIP by an additional 15 basis points (another $42 a month on that $350,000 loan, for a total of a $72 reduction in monthly payment).
Right off the top the HAWK program will save an average Roseville/Rocklin/Lincoln buyer between $1750-2,000 off their total loan amount and $70-100 a month off of their payments after two years compared to an FHA borrower that does not participate!
The detailed guidelines will be posted this summer and the program is slated to roll out in the fall. I’ll let everyone know once the program has been implemented and additional details once they are known…
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