Rocky Hill, Conn., February 5, 2015 – In January, the Federal Housing Administration (FHA) announced a half a point reduction in mortgage insurance premium requirements on the loans it insures, from 1.35 % to .85%. Borrowers who put down less than a 20 percent deposit on a home purchase are required to purchase mortgage insurance to protect the lender against loss if the borrower cannot pay the mortgage. The reduction is FHA mortgage insurance premiums, effective January 26, 2015, is expected to save borrowers hundreds of dollars each year. Reducing housing costs will help greater numbers of potential homebuyers, especially low- and moderate-income buyers, enter the housing market.
“This is fantastic news for first-time borrowers,” said Norbert Deslauriers, interim executive vice president of the Connecticut Housing Finance Authority (CHFA). “The typical CHFA borrower takes out a $160,000 mortgage, so the reduced premium will mean about an $800 savings each and every year.” It’s likely that some of that savings will make its way back into the economy as new homebuyers purchase furniture, appliances, lawn mowers, swing sets and all those items people need when they buy a home. So this is also good news for the economy.”
In 2014, more than half of CHFA’s single-family mortgage loans were insured by FHA. FHA loans require smaller down-payment requirements, so they can be more affordable for first-time homebuyers.
CHFA is a quasi-public agency that provides lower-interest mortgages to first-time homebuyers, or those who have not owned a home in the last three years. FHA or other government agencies, as well as non-governmental insurers insure the Authority’s mortgages. To qualify for a CHFA mortgage, borrowers must comply with specific income limits and sales price guidelines based on where they plan to buy a home. The current rate for CHFA mortgages ranges from 2.75% to 3.125%. Borrowers can apply for a CHFA mortgage from more than 110 participating lenders in Connecticut.
“Homeownership is a key to building wealth, so making it just a little easier for first-time homebuyers to get into the market is important. First-time buyers are the drivers of the housing market. As more buyers come into the market, it allows current homeowners to move up to their next home, creating a positive ripple effect throughout the economy,” Deslauriers added.