After the government nisurer of home loans reduced the annual insurance premiums by half a percentage, applications for FHA loans went on a rise. The Federal Housing Administration accepts mortgages with a down payment of as low as 3.5 percent. The increased volume of mortgage applications was roughly around 1.5 percent, saving the average home buyer about $100/month. This also affected the FHA refinance applications for home owners existing mortgages. FHA purchase applications were up 12.4 percent while the rest of the mortgage application types had decreased in volume.
The 30-year fixed-rate mortgage fell to 3.79 percent, the lowest average since May 2013, MBA reports. The average interest rate for FHA loans dropped to 3.69 percent, from 3.71 percent one week earlier.
“Clearly the drop in insurance premiums, while a bit less than a $100 monthly savings for the average borrower, is bringing more people back to the mortgage table, be it to refinance or buy a home,” CNBC.com reports.
If we recall, in 2013, the FHA required a $1.7 billion bailout from the government after suffering losses from a high number of loan defaults in the aftermath of the financial crisis. Since 2008, FHA has constantly increased its annual premiums for FHA borrowers. Not once, not twice, but five times. The National Association of REALTORS® has estimated that nearly 400,000 creditworthy borrowers were priced out of the housing market in 2013 because of the higher costs in FHA insurance premiums. But in recent months, FHA has turned a profit, which has renewed calls from other groups to lower their insurance premiums to help open the credit box to more qualified borrowers.