FHA Reduces Mortgage Insurance Premium
Due to the improving housing market, U.S. Housing and Urban Development announced that the Federal Housing Administration FHA will reduce FHA mortgage insurance, a common annual insurance premiums from 1.35 to .85 percent. “So what.” you say?
Let’s just take a quick look at the numbers:
FHA mortgage insurance doesn’t go away at 80% anymore. Customers get it for life of the loan. This reduction decreases the out of pocket expenses by $500 for every $100,000 borrowed per year. This is a$15,000 savings per $100,000 loan for the life of the loan. So, a homeowner with a 30-year $100,000 loan will save $41.57 per month. That is a significant savings.
The forecasted benefit for existing homeowners is an average of $900 per year. Additionally, FHA foresees this decrease will create 250,000 new homebuyers in the next three years. To learn more about the recent announcement, you can view CNBC’s analysis. Additionally, FHA stands to benefit as this change makes FHA more competitive with Fannie Mae and Freddie Mac programs.
FHA expects changes to be implemented by the end of the month. FHA will send out mortgagee letters detailing the new pricing. If you or someone, like you, is looking for a home, please have them contact me for a no obligation consultation.