FHA fee cut attracts more first-time buyers
WASHINGTON – July 29, 2015 – The Federal Housing Administration’s (FHA) reduction in mortgage insurance premiums on FHA loans appears to be having an impact on homeownership. The cuts – which average $900 per year – may be prompting first-time and millennial buyers to enter the housing market: FHA loans were used in 23 percent of financed home purchases in the second quarter compared to 19 percent during the same period one year earlier, according to RealtyTrac. “So far, the FHA premium reduction is having a bigger impact on getting millennial first-time buyers and other low down-payment borrowers, such as former homeowners returning to the housing market, off the fence [compared to other federal programs],” says RealtyTrac Vice President Daren Blomquist. The data also finds that the average sale price of FHA-insured purchases was 102 percent of the average estimated market price, versus 101 percent for the same homes at the time of sale for other loan products. “Borrowers using FHA-insured loans are leveraging the savings from the premium reduction to submit higher offers, ” says Blomquist. However, the overall number of loans with down-payments of less than 3 percent has held steady over the last year, meaning that Fannie Mae and Freddie Mac’s 97 percent loan-to-value ratio options have not had much impact yet.
Source: MarketWatch (07/25/15) Goldstein, Daniel© Copyright 2015 INFORMATION, INC. Bethesda, MD (301) 215-4688