Would you go to a housing counseling education program if it would save you nearly $10,000 over the life of your mortgage? The Federal Housing Administration is betting you would.

It’s proposing a new program that would discount mortgage insurance premiums for homeowners who agree to undergo housing counseling before getting an FHA mortgage.

Lenders typically make you buy mortgage insurance when you put down less than 20 percent on a home. The policy generally pays the lender if you fail to make your payments.

If FHA approves the discount program, you’ll get a 50 basis point discount in the upfront FHA mortgage insurance premium you pay at closing, after you take the course. A basis point is 1/100th of 1 percent, so 50 basis points is one-half of one percent. You’ll also get a 10 basis point reduction on your annual mortgage insurance premium.

If you do post-closing counseling and go on to pay your mortgage on time for two years, you’ll get another 15 basis points knocked off your annual mortgage insurance premium.

On the average $180,000 FHA mortgage, you’ll save $9,800 over the life of the loan by completing the housing counseling course and paying on time, FHA estimates.

Why is FHA so hot on homeownership counseling? It has research showing mortgage problems are 29 percent lower for first-time homebuyers who get counseling and 15 percent lower for all homebuyers who get counseling, compared to buyers who get no counseling.

During housing counseling, you’ll receive individual, objective advice on reaching your housing and financial goals, homeowner rights and responsibilities and managing your credit and savings.

The proposed program is part of a bigger effort to help Americans better manage their credit. This will help further homeownership and build lasting wealth.

According to the Urban Institute, the average credit score for loans sold to government-sponsored mortgage companies is 752. Currently, there are 13 million people with credit scores ranging from 580 to 680.

“Shutting these consumers out of the market hurts American families and undermines our efforts to build more stable communities, create pathways to the middle class and increase homeownership opportunities for minority and low-wealth borrowers,” FHA officials said when they announced the proposed program earlier this month.

http://newsletter.homeactions.net/archive/full_article/70/118/164384/1182