Vice President Harris Delivers Remarks on Efforts to Lower Costs for Homebuyers

Bowie, MD

__________

Today, the Biden-Harris Administration announced an action that will save homebuyers and homeowners with new FHA-insured mortgages an average of $800 per year, lowering housing costs for an estimated 850,000 homebuyers and homeowners in 2023.

Vice President Harris and Department of Housing and Urban Development (HUD) Secretary Fudge will travel to Bowie, Maryland, today to announce that HUD, through the Federal Housing Administration (FHA), will reduce its annual mortgage insurance premium by 0.30 percentage points, from 0.85% to 0.55% for most new borrowers. The mortgage insurance premium is the monthly fee that homeowners with FHA-insured mortgages pay to insure their mortgages, which they pay on top of their monthly principal and interest payments.

Homeownership is currently the principal source of wealth creation for most American households. But due to a nationwide shortfall in the supply of affordable homes and shifting demand for housing during the pandemic, first-time homebuyers have struggled in recent years to achieve homeownership. First-generation homebuyers and first-time homebuyers of color – who are less likely to have sufficient resources for a sizeable down payment due to a longstanding gap in intergenerational wealth transfers – have been particularly affected.

Today’s announcement is an important step in making homeownership more attainable. FHA-insured mortgages, which accounted for 7.5% of home sales in the third quarter of 2022, are targeted at homebuyers who otherwise may not be able to achieve homeownership. This cost-lowering measure will make buying a home more attainable and affordable for more low- and middle-income borrowers.

FHA insures loans with a small down payment and more flexible underwriting, enabling families to begin building wealth through homeownership earlier than they otherwise might and providing an open door to credit-worthy borrowers. More than 80% of FHA borrowers are first-time homebuyers, and over 25% are homebuyers of color. The average home purchased with FHA-insured mortgages cost around half the price of the overall national median home and have an average mortgage amount of less than $270,000.

By lowering its annual mortgage insurance premium by 0.30 percentage points, FHA’s action will help new homebuyers all over the country achieve homeownership. For example, the average homebuyer in Prince George’s County – where Vice President Harris and Secretary Fudge are traveling today – will save nearly $900 per year, based on the average home price in the county of around $300,000. In addition:

- A family buying a home in Detroit with a $200,000 mortgage will save $600 per year

- A family buying home in Cincinnati with a $300,000 mortgage will save $900 per year

- A family buying a home in Phoenix with a $400,000 mortgage will save $1,200 per year

- A family buying a home in Austin with a $500,000 mortgage will save $1,500 per year

Over the last several years, FHA’s mortgage insurance fund has accumulated reserves at a level that is more than five times the required threshold set by Congress. This was made possible by HUD’s responsible and responsive management policies, home price appreciation, and significant refinance volume which together have led to an accumulation of substantial reserves. These dynamics make it possible for HUD to calibrate premiums more appropriately to the performance of the loans FHA insures and pass savings on to consumers in a responsible manner and without jeopardizing the long-term sustainability of FHA’s mortgage insurance fund. The premium reduction will take effect on March 20, and will be reflected in the President’s FY 2024 Budget.