U.S. Housing and Urban Development Secretary Julian Castro announced Monday that HUD will cut mortgage insurance rates. The move will ease the burden of rising interest rates for many prospective and current homeowners.
“This is great news for people buying a home as well as for homeowners who want to lower their payments or need money to improve their current residence,” said James Campagna, CEO of the California-based FHA lender Plaza Loans. “Payments will be lower and will allow many more loan applicants to afford the home they want.”
The Federal Housing Administration charges FHA mortgage insurance fees to guarantee the mortgages that it backs. The FHA loans are popular with many buyers who purchase homes with small down payments.
The mortgage insurance rates are being cut by a quarter of a percentage point, the Department of Housing and Urban Development said in the Monday statement. With the reduction, the annual cost for most borrowers will be 0.60 percent of the loan balance.
“It's time the FHA passed along some savings to working families,” Castro said.
Campagna agrees. “This is particularly welcome news in California, where down payment assistance and better rates can make the difference between renting or owning a home,” he said.
The FHA offers through approved lenders, such as Plaza Loans, a variety of financing products, including modest down payments. Saving up for a down payment is one of the biggest hurdles that first time homebuyers face.
The 25 basis point drop from 0.85 percent of the mortgage amount to 0.60 percent goes into effect for both new and refinanced mortgages on Jan. 27.
The reduction will save the average borrower who gets a 30-year fixed-rate $400,000 mortgage about $1,000 a year, according to Campagna.
Homeowners considering a refinance or prospective new home buyers can find out how the new rates affect their payments or ability to qualify by contacting Plaza Loans at 408.978.0400. Plaza Loans offers a free, detailed Transparent Mortgage Analysis for consumers who want to see how this change affects their ability to afford a home.
An application to determine eligibility can be found online at the plazaloans.com website.
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About Plaza Loans
San Jose-base Plaza Loans is a California mortgage banker. As a direct lender, it combines the lending power of a big bank with the personal service of a local firm. Plaza Loans offers a free, detailed Transparent Mortgage Analysis for consumers who want to see how interest and mortgage insurance rates affect their ability to buy a home. Prospective home buyers can get guidance on what their payments will be and how much of a home they can afford by submitting their information via secure connection at www.plazaloans.com. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act NMLS#216565.