FHA Mortgage Demand Rises Nationwide, Banks Eager to Lend in Kansas
Federal Housing Administration (FHA) mortgages–both new mortgages and refinances–rose in popularity in August as more homeowners and home buyers took advantage of historically low interest rates.
According to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, mortgages insured by the FHA rose from 25.5% to 25.9% of transactions in August as compared to July. That moderate rise is the continuation of a trend towards more home buying and mortgage refinancing across the country, but is still below the peak in January of this year, when FHA transactions were 27.3% of all home purchases.
The report, entitled HousingPulse and released in September, suggested that FHA transactions will possibly become a smaller portion of overall mortgages as conventional loans become more popular. “Conventional mortgages are making a comeback while FHA mortgages are not,” said Thomas Popik, Research Director of Campbell Surveys. In total, mortgages were used to pay for new home purchases more frequently in August than in July. A total of 68.9% of transactions were funded by a mortgage in August, compared to 67.5% in the previous month. This suggests that less home purchases are being made by cash-rich investors, and credit is becoming easier to acquire as banks become more willing to lend to a variety of homeowners and home buyers.
In Kansas, several homeowners had expressed frustration with securing a refinance of their existing FHA home loan. Thanks to new FHA streamline guidelines put into effect on June 11th, it is now easier than ever for homeowners to refinance their loans, and at lower cost. Since the government lowered the cost of FHA mortgage insurance, the rate of FHA streamline refinances has risen considerably both in Kansas and across the country. This is partly because FHA insurance premiums have been drastically cut. Anyone refinancing an FHA loan has to pay a 1.750% upfront premium, but since June 11th that upfront premium was lowered to 0.01% for loans that were endorsed prior to June 1, 2009. This means that a homeowner refinancing a $100,000 mortgage must pay just $10 in upfront insurance premiums.
For the duration of the loan, the annual insurance premiums have also fallen. Eligible homeowners will see their premiums fall to 0.55%, meaning a borrower with a $100,000 mortgage refinanced according to the new FHA streamline rules will pay just $550 in annual premiums, or $45.83 monthly. Homeowners with an eligible existing FHA loan can qualify for the new FHA streamline process, and they can secure extremely low interest rates thanks to record low rates on all types of home loans.