On Thursday, January 8, President Barack Obama laid out the administration's latest effort to breathe new life into the nation's housing market and increase the ranks of first-time buyers, now at a 27-year low. Effective January 26, the Federal Housing Administration (FHA) will lower the rate of the annual mortgage insurance premium paid on agency-backed 30-year fixed loans by a half percentage point, to 0.85 percent of the loan balance from the current 1.35 percent. The administration estimates that the decrease will trim a borrower's annual payment by $900 and enable 250,000 people to buy their first homes during the next three years. The reduction will only apply to new home loans and refinancings insured by the FHA. That means existing FHA-backed loans would need to be refinanced to receive the lower rate. Speaking at a school in Phoenix, Obama said the reduced premiums would spur home buying, lifting the market and home values. But he cautioned that the smaller premiums did not mean a return to lax home-lending standards.

The announcement signals the administration's desire to move beyond repairing the damage to growing the market and drew praise from real estate agents, lenders and housing advocates. The FHA announcement followed a policy change announced last month by Fannie Mae and Freddie Mac to begin accepting mortgages with 3 percent down payments. Obama prefaced his announcement by recalling when he and wife, Michelle, bought their first home, a 2,000-square-foot condominium in Chicago. "I'll never forget the day we bought our first place," Obama said. "I have such good memories not just about the place itself, but all the work we had to do to save to get in there, and then to fix it up, and that sense of accomplishment that you were building something for your family and for your future."

Source: The Chicago TribuneNote: if you are thinking about purchasing a home and were planning to use FHA financing--this is the time to act. Contact us to get the process started.