We ended 2016 with the Federal Reserve increasing the key interest rate for the first time in nearly a decade. We were told to expect three more increases this year. Mortgage interest rates are not determined by the Federal Reserve, but they do tend to be influenced by them. If you are a first time homebuyer and are nervous about mortgage interest rates increasing the good news is the Federal Housing Administration (FHA) just announced that it will be reducing the annual premium buyers are to pay.
The FHA is an agency run by the Federal Government which was created as part of the National Housing Act of 1934. Its job is to provide underwriting, set construction guideline standards, as well as to insure loans that are issued by private lenders for home construction, and to insure loans provided by banks.
Many first time homebuyers choose to use an FHA loan for financing their first home. With an FHA loan borrowers need to only have a 3.5 percent down payment versus the customary 20 percent down with a traditional mortgage loan. With an FHA loan comes insurance premiums, and the agency announced it would be dropping its annual premium by 25 basis points from 0.85 percent to 0.60 percent. The new change takes effect on January 27th, 2017.
The average homebuyer with a $200,000 mortgage loan with a 30-year fixed-rate can expect to save $500 a year with the new insurance premium cuts. Nationwide – 1 million homeowners will benefit from this reduction.
If you are looking to buy or sell a home along the Jersey Shore there is no better time than now. Home prices are rising and so too are mortgage rates. We are here to help you with all of your real estate needs. Contact us today via email or give us a call directly at 609-264-6762.