The Federal Housing Administration (FHA), appears to willing to consider reducing the cost of using FHA insured financing to purchase or refinance your home.
FHA has been fairly controversial over the past year by increasing mortgage insurance premiums significantly in early 2013, and then finally making mortgage insurance permanent for anyone acquiring FHA financing after June, 2013.
After months of outcry that FHA is too expensive, and ultimately hurting the borrowers it was designed to help, it seems that a compromise is on the horizon.
FHA is introducing a new pilot program that is designed to promote homeownership through reward based education.
Shaun Donavan, Secretary, U.S. Department of Housing and Urban Development has announced a four-year, two-phase pilot program called HAWK, or Homeowners Armed With Knowledge.
HAWK will offer a will offer a 50 basis point reduction in the upfront mortgage insurance premium and a 10 basis point reduction in the annual premium at the time of loan origination to first-time homebuyers who complete the program.
The purpose of the HAWK pilot program is to reward homebuyers who commit to housing counseling by offering a tangible savings on their FHA insured mortgage loan. It has been proposed that the average buyer (based on $180,000 loan amount) would save approximately $325 a year, or almost $9,800 over the life of their loan.
The homebuyer can receive the savings by completing housing counseling before signing a contract to purchase a home. If the buyer completes the counseling, they will receive a 50 basis point reduction in the upfront FHA mortgage insurance premium and a 10 basis point reduction in the annual FHA MIP.
If you also choose to participate in post-closing counseling and display a track record of timely mortgage payments, it will bring even greater benefits. Under the HAWK program, you would receive an additional 15 basis point reduction in annual MIP after two years with no serious delinquencies.
Example Based on $300,000 FHA Loan with 3.5% down payment
The HAWK program, which is part of FHA’s Blueprint to (Credit) Access is expected to launch some time later in 2014. Studies show that homeowners that undergo financial and homeownership education counseling make smarter financial decisions that result in significantly lower default rates.
The commitment to making positive changes, and creating greater access to FHA financing is being openly discussed by top HUD officials. Here are a couple of recent quotes:
“FHA’s mission is to make sure that there is access to affordable mortgage credit for underserved borrowers and communities,” says Carol Galante, FHA commissioner. “Our blueprint to expand credit access outlines the steps we are taking over the next few months to make that happen. These programs transform the way we do business, make us a better partner, and help reduce risk across the market.”
“This is a win for families, FHA, lenders, realtors and the overall market, which is why we are very excited about its potential impact,” adds Shaun Donovan, Secretary, U.S. Department of Housing and Urban Development. “We want to create an environment that encourages responsible behavior and provides clear rules of the road so lenders can originate loans without fear of unanticipated consequences. We want lenders to be able focus on the quality of their processes and lend to all qualified borrowers.”
At FindMyWayHome.com, we can back up the fact that educated homebuyers are more empowered, have less stress, and are less likely to buy above their means.
As first time homebuyer specialists, we also have extensive experience coaching potential buyers into a position where homeownership is a reality.
We are encouraged by the enthusiasm behind FHA’s HAWK program and look forward to sharing more as we learn it.
In the meantime, if you have any questions, comments or would like a second opinion, do not hesitate to call, chat, email, or leave a question or comment below. We answer all questions.
Happy House Hunting!