Federal Housing Administration borrowers may be able to lower their mortgage insurance premiums if they agree to undergo housing counseling.
FHA announced a new program – Homeowners Armed with Knowledge (HAWK) – earlier this month that would allow FHA borrowers who complete counseling before closing to receive a 0.5 percentage point reduction in their upfront insurance premium. They will also see an annual premium drop by 0.1 percentage points.
Borrowers may also qualify for more savings too. Borrowers who take part in post-closing counseling and show a record of on-time payments for two years can receive an additional 0.15 percentage point reduction.
On an FHA loan with an average loan balance of $180,000, borrowers who go through counseling would be able to decrease their payments by nearly $325 a year in insurance costs – or $9,800 over the life of a 30-year loan, according to FHA.
To be eligible for the reduced rates, FHA borrowers must undergo a Department of Housing and Urban Development-approved counseling class. The changes are expected to roll out this fall as part of a four-year pilot program.
Source: “FHA Loans Get Better with Credit Counseling,” The New York Times (May 22, 2014)