How Will Changes to FHA Loans Affect Buyers?

by Isaac Benmergui, Esq on June 14, 2017

FHA loansRecently, President Trump reversed some rate cuts that President Obama made for FHA borrowers. But what does that mean for mortgage rates and borrowers?

The mortgage rate cut was supposed to help one million borrowers save up to $500 a year on monthly mortgage insurance, which is required for loans with less than 20 percent down. The cuts also made it possible for more people to qualify for FHA mortgages, since the cuts in monthly payments would help reduce debt-to-income ratios for borrowers. FHA loans made up 16 percent of loans for single-family homes in 2016.

Well before Trump assumed office, some housing experts were concerned about these rat cuts because of they effect they would have on the FHA mortgage insurance fund. The FHA is required to maintain a certain amount of capital on hand equal to 2 percent of all the loans issued. The ratio was 2.32 in 2016, which was why Obama signed an executive order authorizing the cuts. But some worried that they would cause the cash reserves to drop too low, putting the FHA at risk in the event of another major housing crash.

Reversal of the Obama decision would only mean about $40 more a month for a homeowner who purchased a $200k home when the reduced rates were in effect. Homeowners who were right on the cusp of qualifying due to debt-to-income ration may no longer be able to get a loan until they save more for a down payment or pay off debt.

Call Miami Real Estate Lawyer Isaac Benmergui at 305.397.8547 and set up a no charge, no obligation consultation to discuss your case. We have over a decade of experience handling Real Estate and Civil Litigation cases throughout Miami and South Florida, and will use our expertise to help your case to the best of our abilities.

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