The Federal Housing Administration (FHA) just announced a quarter point reduction in annual mortgage insurance rates for their FHA-backed mortgages. This will save existing homeowners with FHA-back mortgages money immediately and will make the FHA-backed product a bit more affordable for new buyers. FHA mortgages are generally available to buyers will slightly lower credit scores and still only require a 3.5% down payment.
FHA took big losses in 2009-2012 and saw it’s reserve fund dip below acceptable levels so it increased both upfront and annual insurance premiums to boost that reserve. While interest rates remained low, the cost of an FHA mortgage increased to a point where it was no longer attainable for the potential home buyers it was intended to serve.
FHA remains more expensive than conventional mortgages though with the highest upfront and annual insurance rates. As the market has rebounded, low down payment conventional mortgage products have come back for buyers will good credit scores. These programs still require mortgage insurance but those costs are lower.