The White House made it official last week that the Federal Housing Administration would be cutting the mortgage insurance premium for those securing FHA financing by over 1/3 of the current rate, from 1.35% down to 0.85%. Seemingly lost in the ensuing news is how this rate cut affects the homebuying market, specifically that of the Washington DC area.
The overwhelming majority of those currently residing in the DC area are renters, with many of them never having owning a home before. For first-time buyers, the lowered FHA mortgage insurance rate is expected to save them $900 per year on a $200,000 mortgage, which could mean savings of a full month’s payment in some cases. Washington DC being considered a high-price area, FHA financing can be used to purchase a single-family home up to $625,500 which means buying a $600,000 will cost you $2700 per year less than a year ago.
So, if you happen to be one of the many renters trying to navigate through the ever-rising renal rates within the Washington DC area, the FHA announcement brings you some much-needed good news. However, there are still things to be aware of before running straight to the bank.
Just as a large number of renters has increased the demand for rental housing, and therefore its price, you can expect that trend to carry over into the buyer’s market as well, especially for those searching in neighborhoods whose properties already carry a hefty price tag. Still, this isn’t necessarily a bad thing, as neighborhoods once considered to be “less desirable” could experience a renaissance of sorts, as the lower price points help to usher in younger, up-and-coming families.
For those who currently own their own home in the Washington DC area, this is most certainly a good thing for you as well, as an increase in demand directly correlates to an increase in property value,meaning it could be a good time to sell, or even purchase more properties to use as rentals, as that market will still be alive and well despite the FHA’s rate cut.
So while you’re taking the time to soak in the good news, also be sure and discuss your situation and how the rate change will affect you with a licensed real-estate agent who knows the DC area both inside and out. After all, what good is an opportunity to invest, if you invest in the wrong opportunity?