Mortgage premiums for FHA loans fall by half of a point

The Federal government has announced that mortgage insurance premiums for home loans backed by the Federal Housing Administration (FHA) will drop from 1.35 percent to 0.85 percent at the end of January. The change will make it more affordable for first-time homebuyers to purchase insurance and reduce down payments. On average, this could reduce costs for homebuyers by about $900 a year and save money for homeowners looking to refinance their mortgages.

The announcement comes one month after Fannie Mae and Freddie Mac said they would begin accepting down payments as low as 3 percent from buyers with very good credit scores. According to the Associated Press, only 31 percent of November home purchases in the United States were made by first-time owners, well below the average of 40 percent.

Lenders have been reluctant to finance owners with short credit histories because of increased pressure from federal authorities following the subprime crisis. Authorities have stressed that the new measures do not open the market up to borrowers with bad credit or insufficient savings.

"The single best thing first-time homebuyers can do to improve their chances to qualify is to bring more money to the table for the down payment," said CoreLogic deputy chief economist Sam Khater to the AP. "Homeownership is about building equity, so anything that buyers can do to get a good start on building equity will help them achieve sustainable homeownership."

Mortgage loan software helps lenders keep track of all deals and automatically perform key accounting and reporting tasks while ensuring the complete security of sensitive financial information.