With the recent run-up in mortgage rates and housing prices still near record highs, the White House is hoping to ease some of the sticker shock of buying a home with a program that could save some first-time and low-income homebuyers hundreds of dollars a year.
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The Federal Housing Administration is lowering its annual mortgage insurance premium to 0.55% from 0.85% for most new borrowers, according to the White House. On a $300,000 home purchase, the 0.3 percentage point reduction would save the average borrower about $800 a year.
The mortgage insurance premium is the monthly fee homeowners with FHA-insured mortgages pay on top of monthly principal and interest payments. FHA-insured mortgages are targeted at homebuyers who otherwise may not be able to qualify for a home loan. Purchases made with government-backed loans made up 7.5% of home sales in the third quarter, so the rate reduction could help up to 850,000 homeowners save money in 2023, the White House says.
Though the initiative doesn't put more homes on the market, it could make buying the ones that are out there smart a little less.