A bungalow style home for sale in San Francisco.
A bungalow style home for sale in San Francisco. - 
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First-time homebuyers will find it a little easier to afford a monthly mortgage payment starting Monday. The Federal Housing Administration is lowering the rate it charges to insure mortgages by half a percent, which will add up to an average savings of about $75 a month, according to the FHA.

FHA loans are popular with first-time homebuyers, because they require a smaller down paymentas low as 3.5 percent. The federal government hopes lower monthly payments will spur as many as 250,000 new homebuyers into the market, in addition to reducing monthly costs for the expected 2 million borrowers who the government projects will take out FHA loans over the next three years.

But Jim Parrott, a senior fellow with the Urban Institute’s Housing Finance Policy Center and a former housing advisor in the Obama Administration, says the change will likely help only some potential first-time homebuyers—For most, the obstacle is the tough standards for qualifying for a loan in the first place.

"There are probably more folks out there who are being locked out of the market because they can't get a loan than those who are simply unable to afford the loans that are being offered," Parrott says.

Still, Daren Blomquist of RealtyTrac says the drop in monthly mortgage costs will help make some medium-sized cities more affordable: Denver, parts of Seattle and Boston, and Minneapolis, for example.

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