Source: money.cnn.com By Chris Isidore
In an effort to make owning a home more affordable, the Federal Housing Administration will dramatically cut the costs associated with the mortgages it backs.
Premiums for FHA mortgage insurance, which is designed to protect the agency in case a borrower defaults on a loan, will be cut from 1.35% of a loan's value to about 0.85%, the White House said in a statement Thursday.
As a result, a typical first-time homebuyer will save $900 a year on their mortgage payments. Existing homeowners who refinance into an FHA loan will see similar savings.
"Too many creditworthy families who can afford -- and want to purchase -- a home are shut out of homeownership opportunities due to today's tight lending market," the White House said.
The White House estimates that the lower premiums will enable up to 250,000 new buyers to purchase a home.