Just in case you missed it, Congress passed H.R. 3700, The Housing Opportunity Through Modernization Act of 2016, last summer. It passed unanimously in the House and the Senate – not an easy feat, right?
This law, among other things, aims to help ease homelessness and improve “…low-income tenants’ access to low-poverty areas with less crime and well-performing schools,” says Barbara Sard, vice president for housing policy with the Center on Budget and Policy Priorities.
These aspects of the act are certainly with a look, one is of particular interest to anyone hoping to buy a Southern Maryland condo using an FHA-backed loan. These buyers typically include older Americans, those with low incomes, and first-time homebuyers. Making condos easier to finance makes the dream of homeownership a reality for these groups of Americans.
The U.S. Department of Housing and Urban Development (HUD) offers condo communities a complex and lengthy process to become FHA-approved. It is so challenging, in fact, that many homeowner associations don’t bother pursuing it. That means there are not as many condos available to FHA buyers as the industry would like to see. Because of this, FHA condo lending has been steadily down trending over the past few years. In fact, it fell an additional 8.6 percent during the first quarter of 2016.
One of the criteria for a condo community to become approved is that 50 percent of the units must be owner occupied. H.R. 3700 changes that requirement to 35 percent, opening up many more communities to possible FHA approval, providing more condos for buyers.
That was then … and this is now
These changes happened several months ago, but even more good news was released recently. If you get an FHA-backed mortgage, you will be required to pay an upfront mortgage insurance premium and a monthly premium for the life of the loan. (No, that’s not the good news.)
The good news is that the amount of the premium is going down. As of January 26 of this year, FHA’s MIP will be cut from .85 percent to .60 percent of the base loan amount.
HUD estimates that this will create at least 250,000 new homeowners and save them, on average, $900 per year (or $75 per month). Sure, that may not sound like much, but for a buyer on a tight budget, that $75 a month helps buy groceries or put gas in the tank.
This reduction in the cost of the mortgage insurance premium applies only to loans with case numbers assigned on or after January 26, 2017. So, if you recently closed on a home using an FHA-backed mortgage, it won’t apply to your loan. The only way for current homeowners with FHA loans to receive this reduced MIP is to refinance.
Questions? Get the answers, here, or speak with your lender.
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