Home ownership has been out of reach for entry-level buyers for about ten years. New changes backed by the Federal Housing Administration (FHA) will now allow low-risk borrowers to take advantage of some very attractive mortgage rates. Until recently, the FHA would secure down payments as low as 3.5 percent but they have made plans to slash annual premiums for bowers down by 0.5 percentage points (effective Jan. 26, 2016). Usually a monthly premium on an FHA loan is the same regardless of the credit score of a borrower, so in comparison between this and a conventional loan across the FICO spectrum, the FHA loan is definitely the way to go.
And that’s not the only reduction you’ll see this year in the housing market.Fannie Mae and Freddie Mac are also taking a new approach to mortgage programs allowing homebuyers to put as little as 3 percent down!
What These Changes Mean to You
If you have been wishing, hoping and dreaming of the day when you can take your hard earned money and STOP paying rent, you aren’t alone. Millions of Americans have been waiting just like you for this kind of break in the housing market and it’s finally here!
These changes make a big difference when it comes to making a private mortgage a reality. So, if you have been holding off on shopping for the new home of your dreams because of your FICO score – it’s time to re-think your position. The FHA’s premium reduction is going to help! At the current premium (1.35 percent of the loan total) it is beneficial to choose a low down payment and private mortgage insurance – if your FICO score is around 700 and above. BUT when the FHA’s reduced premium of 0.85 percent is implemented, loans will immediately become a more economical choice across all FICO borrowing groups ready to put down 3.5 percent.
Putting it into Perspective
A loan for a $250,00.00 home with 3.5 percent down and interest rates of 4 percent for FHA, and 4.25 percent for private mortgage insurance would (at the reduced premium rate) result in an estimated monthly payment of $1,343.00 (FHA loan ). That’s much less than the estimated payment of $1,593.00 for a loan with conventional financing at FICO levels between 620-639. Even at the cheapest FICO levels, a conventional loan payment could be $1,426.00.
There are of course other factors that can further complicate things, but it may be time to take a closer look at these new programs to see which is right for you. Fannie, Freddie and the FHA have new restrictions that could mean that it’s time for first-time buying!
If you’d like to become the proud owner of a beautiful home in the “Northeast Kingdom”, or any of Vermont’s other beautiful destinations, contact us at PallSpera today. We’d be delighted to help you find the home of your dreams, the home you deserve. Our specialty lies in finding properties that match every buyer’s unique needs and preferences, ensuring that every sale is a perfect match. With over 25 agents on board, our team is ready to begin your quest for the ideal abode.