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FHA mortgageThe Department of Housing and Urban Development (HUD) announced a major change to FHA mortgages.  The change takes effect today, January 26, 2015.  As a result, your FHA mortgage will now cost  you much less because fees are lowered.

The FHA is reducing it’s mandatory annual insurance rates for 30 year mortgages.  This makes them much more affordable.

30-year mortgages see their mandatory insurance rate cut by .50% for loans with less than 5% down.  It was 1.35% before; now it’s .85%.  For FHA-insured loans with more than 5% down, the previous 1.30 percent rate is reduced to 0.80%.FHA Mortgage

HUD estimates that the average borrower will save $900 per year in mortgage costs.  This is huge.  FHA borrowers save thousands over the life of their mortgage.  There is a catch – this only applies to loans of longer than 15 years.

You are not lost if you’ve already applied for a FHA mortgage.  You can also take advantage of this even if you have a full commitment and are waiting to close.  The FHA allows you to cancel your current loan case number and get a new one on or after January 26th.  As a result you qualify to take advantage of this new program.

The effect of these reductions is to lower the cost of FHA mortgages.  This expands the affordability of these loans.  It increases the price range a borrower can qualify for too.

The FHA has made the dream of home ownership a reality for millions of people nationwide and thousands in Bergen County.  This is great news for the real estate market.  It enables more people to buy a home more affordably.

I do not believe that this will overheat the real estate market.  The previous insurance fees were loudly denounced by economists and the real estate industry.  Because we don’t want to return to irresponsible lending, the FHA may have over reacted.  Moderating insurance fees to reasonable levels is positive for both the FHa and real estate.

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