January 12, 2001

Making Homeownership More Affordable

HUD Secretary Andrew Cuomo says that "A mortgage is the key that unlocks the door to homeownership and a secure financial future," and we agree. We also agree when he adds: "Too many minority families are renters who see their rents go up year after year without any financial benefit."

Many families in our community own their own homes thanks in part to HUD's Federal Housing Administration (FHA). FHA assist first-time buyers who might not be able to meet down payment requirements for conventional loans. FHA works through local mortgage lending institutions to provide federal mortgage insurance for the purchase, rehabilitation, or improvement of affordable housing.

Beginning January 1, HUD introduced a new FHA "Homebuyer Savings Plan" that will make owning a home even more affordable. By significantly reducing the cost of mortgage insurance, homebuyers will pay one-third less for mortgage insurance—a savings of as much as $4500. According to HUD, their new plan will help more than one million homeowners with FHA-insured mortgages save more than $1 billion in mortgage insurance costs every year.

The Homebuyer Savings Plan reduces up-front premiums requirements from 2.25 percent to 1.5 percent of the original loan amount, a one-third reduction in your up-front mortgage insurance costs. The new savings plan also eliminated the annual insurance premium once you have paid off 22 percent of your loan. This saves you money and still provides important FHA mortgage insurance for the life of your loan.

FHA has helped make the dream of owning a home come true for more than 30 million families, and FHA is one of the reasons America has an all-time homeownership rate—including for African Americans (48.2 percent), Hispanics (46.7 percent), central city residents (51.9), households headed by females (53.3 percent), and married couples under 35 (61.0 percent). This new program will help millions more families realize their number one dream of owning a home.

HUD is a strong supporter of homeownership for all Americans, and especially wants to help minorities and low-income families become homeowners —one of the primary ways of accumulating wealth in our society. HUD understands that homeownership is a basic value we all share, no matter what our age, income, ethnic heritage, or geographic location—that's why it's called "the American dream." We applaud HUD's new Homebuyer Savings Plan, and encourage everyone who wants to live their own American Dream look at how HUD and FHA can help you make your dream come true.

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