Shortly after President Trump took office, his administration made a decision that could impact your home loan costs.
President Donald J. Trump has rolled back a planned Federal Housing Administration policy to reduce the insurance premiums people pay monthly on FHA-backed mortgages.
The Los Angeles Times reports that the initiative could have saved homeowners hundreds of dollars annually on mortgage insurance, which is required with FHA-backed loans.
But the new Trump administration killed the planned fee cut on Jan. 20, just a week after the Obama administration first announced the initiative, which was supposed to take effect on Jan. 27.
According to the Times, the Trump administration indefinitely suspended the pending FHA insurance rate cut just an hour after Trump was sworn in as president.
The U.S. Department of Housing and Urban Development oversees the FHA. FHA-backed loans are popular with first-time homebuyers and people with fair to poor credit.
The Obama administration had estimated that homebuyers with FHA-backed mortgages would save an average of $500 a year with the rate cut, the Times reports. It was an effort to offset recent rises in mortgage rates and make buying a home more affordable.
However, Republicans had concerns about the rate cut. According to the Times:
Some Republicans expressed concern that the rate cut could cost taxpayers if the loans started to go sour and the Federal Housing Administration was unable to cover the losses.
If you’re a potential homebuyer considering an FHA-backed loan, you might have to dig deeper into your pockets to pay for mortgage insurance. According to the Times:
For most borrowers getting an FHA-backed loan that means that after paying an upfront insurance fee, you will pay 0.85 percent of your loan amount for premiums each year.
The Obama administration action would have lowered the rate from 0.85 percent to 0.60 percent.
“For most borrowers buying homes with down payments of less than 5 percent, the monthly mortgage insurance payments will remain $141.67 for a $200,000 loan” instead of falling to $100 monthly, Bankrate explains.
What do you think of the Trump administration’s decision to abandon the rate cut? Share your thoughts below or on Facebook.