201701.10
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FHA Trying to be Competitive – Worth a Second Look

For the past several quarters, many of our closings for home buyers in the starter home or first move-up category have revealed a loss of FHA market share.    It seems that the traditional market for FHA appeal was the 1st or 2nd home market with buyers lacking a substantial down payment.  FHA loans can allow you to buy a home with as little as 4% down.   The convenience of being able to buy a home before amassing some savings comes with a price tag.   Many of our clients felt that FHA was just too expensive and the APR numbers came in quite a bit higher than Conventional loans.  Conventional products have slowly been reintroduced to the market place which help low down payment buyers that don’t want to pay an effective interest rate that is 1% or 2% higher.   Of course, the VA loan is always the gold standard for low down payment mortgages if a borrower is eligible.

Over recent months though, it seems FHA has seen its market share shrink sufficiently that changes are on the horizon.    It may also help that the incoming administration seems to have little appetite to prop up government lending programs that are not significantly helping the homeownership rate characterized as the worst since WWII.

To start with, “The FHA is reducing its annual mortgage insurance premium by 25 basis points for most new mortgages with a closing or disbursement date on or after Jan. 27. The new rates are projected to save new FHA-insured homeowners an average of $500 this year, HUD Secretary Julian Castro said”.