Greetings from the Vermont Mortgage Company! As we are sure many of you have heard, the Federal Housing Administration (FHA) has cut the annual mortgage premium by 25 basis points. What this means is the cost of a FHA Loan is now .25% lower, making mortgages more affordable.
This decrease will take effect on mortgages closing on January 27th or after, meaning any future mortgages will benefit from this cut. The FHA made this decision to offset the rising annual rates that have begun since late last year. Due to the steady and continual growth of the FHA over the last 4 years, it was seen as a financially responsible act to help homebuyers where costs are going up. This means that homebuyers could save an average of $500!
So we know that the FHA loan is cheaper than before. But what is it exactly?
A FHA loan is insured by the Federal Housing Administration, created to provide mortgage lenders with adequate insurance after the tempestuous 1930’s. These loans are very popular with first time homebuyers due to their low cost and loose requirements when compared to other loans. You can qualify for a loan in the 3% range with a credit score of around 580, and even with a score with 500-579 if 10% is put down. So they are easier to acquire for those with lower credit scores. They can also be used to purchase a 1 – 4 unit property!
But, there is a catch:
To get a FHA approved loan, one must have two kinds of insurance:
-An Upfront Mortgage Insurance Premium (UFMIP), which is a one time payment that can be financed into the loan amount.
-Annual MIP, which is charged monthly.
So an affordable mortgage just got cheaper, and slightly lower premium could save you thousands! As long as you are able to meet the requirements, the FHA loan could be perfect for you! For more information on the FHA loan, check these out:
If you have any other questions, please contact us at 802-863-2020, or visit us on our website at vermontmortgagecompany.com!