Thanks to a new initiative from the Obama administration, the home buying process just became a bit easier for hundreds of thousands of Americans.
Homeowners must pay a mortgage insurance, which is typically included in their loans. The annual mortgage insurance premium is currently at 1.35%, but thanks to a new measure from President Barack Obama, the rate will lower by half a percentage point to 0.85%.
The President spoke Thursday, Jan. 8, in the Central High School gymnasium in Phoenix, AZ, about the new measure, tell the crowed that it would encourage a stronger housing market. “Hundreds of thousands of new buyers is going to mean a healthier housing market for everyone,” he told the crowd.
The new lower insurance rate will apply to federally issued mortgages, such as those that go through the Federal Housing Administration (FHA).
This latest effort is another of the President’s changes to help improve a rebounding economy. Since taking office, Obama told supporters in Phoenix, he has added jobs, lowered gas prices and helped more people receive health insurance.
The savings, according to Obama’s speech and press release from the White House on Jan. 7, would be modest: about $900 for each home buyer.
Yet the reduction in the mortgage rate may make it easier for some buyers to afford loans, especially since the housing market collapse of 2008 added greater restrictions to mortgage lending.
Overall, around 800,000 homeowners across the U.S. should benefit from the rate’s reduction.
While the rate is significantly lower after Obama’s announcement this week, it isn’t the lowest the rate has ever been. In fact, the amount has gone up in recent years, but it got as low as 0.55% in 2010.
The President may have chosen Phoenix as the site for his speech due to the area’s suburban housing issues. In 2008, the region was representative of the housing bubble across the country.
One such suburb, the city of Maricopa, saw its population grow from 1,000 around the year 2000 to over 33,000 residents within just a few years.
But what had been a fast growth for the city suddenly did a 180, and one in 10 of the city’s homes was empty by 2008.
Today, the small city has made a recovery, and the population is around 45,000 today.