Obama to reduce FHA mortgage premium rate for first-time buyers; goal is to boost home buying

Economic IndicatorsAssociated Press

First-time homebuyers whose home loans are guaranteed by the Federal Housing Administration would benefit from an Obama administration move to lower mortgage insurance premiums.

Under the plan, the housing administration will reduce annual mortgage insurance premiums by 0.5 percent, to .085 percent. The White House says the reduction means new home buyers would pay $900 less a year than they would without the change.

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The White House on Wednesday announced the reduction, which will be a centerpiece of President Barack Obama's trip to Phoenix Thursday.

Current homeowners who refinance into an FHA mortgage would also benefit from the change.

Even with the reduction, the new 0.85 percent premium is higher than historic norms. The rate was increased to raise FHA capital reserves which took a hit during the housing crisis.