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A new measure passed by the House Financial Services Committee recently could help more low-income households achieve their dream of homeownership.
The bipartisan legislation called the Housing Financial Literacy Act requires the U.S. Department of Housing and Urban Development (HUD) to provide a 25-basis-point discount in upfront Federal Housing Administration (FHA) single-family mortgage insurance premiums for first-time homebuyers who complete a housing counseling program to help them sustain homeownership.
The bill was introduced by Rep. Joyce Beatty (D-OH) and Rep. Steve Stivers (R-OH).
“Motivating first-time homebuyers to seek vital pre-purchase counseling and equipping them with the much-needed financial skills and tools to make informed financial decisions benefits their families, the surrounding neighborhood, and our entire economy,” Beatty said. “I am pleased to see my bill move one step closer to becoming law, and many thanks to my Democratic and Republican colleagues for their support.”
The Bill still needs to be passed by the Senate before it goes to the President's desk to get signed into law. According to a CNBC report, if passed, this legislation would allow first-time homebuyers, especially those from low- or moderate-income households, who opt for an FHA loan to pay less.
Currently, borrowers who take an FHA loan are required to pay mortgage insurance to the agency as well as an upfront mortgage insurance premium, since these loans are often taken by buyers with low credit scores and pose an increased risk for lenders. Borrowers today, pay 1.75% of the base loan amount towards mortgage insurance.
However, if the bill passes the Senate vote, they would have to pay only 1.5% of the base loan amount towards these charges, if they opt for housing counseling, the CNBC report indicated.
"The Department of Housing and Urban Development, which FHA is part of, should make sure the counseling is designed well," Pete Mills, SVP of Residential Policy for the MBA told CNBC. "Face-to-face would be better than online."
