Trump Scraps FHA Rate Cut — What Does It Mean for You?

Photo by /

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.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
5 Reasons You Should Retire Sooner, Not Later
5 Reasons You Should Retire Sooner, Not Later

Waiting until age 70 to retire isn’t for everyone. Could you be waiting too long?

20 Purchases That Buyers Almost Always Regret
20 Purchases That Buyers Almost Always Regret

The temptation can be great, but stop and think before you buy these items. You’ll save yourself money and trouble.

26 Things Everyone Should Keep in Their Car
26 Things Everyone Should Keep in Their Car

These tools and conveniences help protect drivers from hassles and calamities on the road.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started


Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.