On January 9, less than two weeks before he would have to leave office, former President Obama made the decision to make a cut to Federal Housing Administration (FHA) mortgage insurance premiums by a quarter of a percent, citing the current financial stability of the insurance fund. The cut would have taken effect on January 27, 2017 and was set to save new homeowners hundreds of dollars every year ($500 on a $200,000 home) and enable thousands of people to buy their first home. Within one hour of his presidential inauguration, President Donald Trump effectively halted these cuts and they are now "suspended indefinitely".
Mortgage rates have been rising lately, with the current rate on a 30-year fixed loan being 4.09% (one year ago it was 3.81%) and it is expected to continue to rise, something the FHA premium cuts would have helped offset for borrowers. The FHA is estimated to back about one in five loans and is favored by those with less-than-stellar credit or who can only make a small down payment on a house, sometimes as low as 3.5%. In return, borrowers pay an insurance premium to help protect their lenders in the event of a default. The flexibility with credit and low down payment rates make the FHA popular with middle-class Americans and first-time home buyers.
Although the move would have benefited the buyers, Dr. Ben Carson, the housing secretary nominee, stated that the cut would cost $5 billion during the next fiscal year. Although this cut is indefinitely halted, promises of a closer analysis of the cut could result in the decision being reversed and the cuts reinstated by Trump's administration.
These changes will trickle down to affect everyday consumers in the near future. Many of the proposed changes and alterations Trump has in mind should help the real estate market to grow further. The past several years have shown consistent improvement and the coastal areas of South Alabama and Northwest Florida are among the fastest growing in these Southeastern states. For more info on current market conditions along the Gulf of Mexico, check out our Gulf Coast condo sales info.