The U.S. Department of Housing and Urban Development (HUD) is reducing fees on FHA loans in an effort to make homeownership more affordable.
More specifically, HUD in conjunction with the Biden-Harris Administration will Reduce your annual mortgage insurance premium (MIP) by 30 basis points.
The move is expected to save the average homeowner about $800, or about $67 per month. and more for those with large loan amounts
Overall, this should translate into about $600 million in savings over the next year alone, and “billions over the next decade.”
The new pricing applies to pre-guaranteed mortgages on or after March 20, 2023.
The FHA’s annual mortgage insurance premium is reduced to 0.55% for most home loans.
FHA MIP Reduction announce Today is the first price update in eight years.
Help reduce the annual insurance cost as much as possible. FHA Loan from 0.85% to 0.55%
I say the most because the pricing applies to a loan-to-value (LTV) ratio of 95%+ with mortgage terms over 15 years.
Many FHA borrowers place a 3.5% down payment and get a 30-year fixed mortgage, so this is the most common insurance quote.
For a $450,000 loan, the monthly premium will drop from about $319 to $206 per month. savings of about $113 or $1,356 per year
It is important enough to make borrowers rethink. FHA vs. the Common Loan Argument.
If you are a home buyer Be sure to carefully compare the total payments of the two types of loans.
While reducing your ~$100 payment may not make or break your decision to buy a home. But it can affect your loan type decision.
as stated This change will affect mortgages endorsed on March 20, 2023, or after March 20, 2023.
This means homebuyers will be able to take advantage of better pricing on FHA loans this spring.
It should increase the share of FHA loans, which have already increased in recent months.
and may widen the division between corresponding credit Sponsored by Fannie Mae and Freddie Mac with new DTI prices and 780 Figo score bucket
First FHA Loan Pricing Update Since 2015
This is the first time FHA loans have become cheaper since January 2015, back when the annual MIP. reduce from 1.35% to 0.85%
at the beginning of 2017 MIP down 0.25% approved but solid fast by President Donald Trump at the time
So this is a big deal considering how long it’s been since we’ve seen mortgage insurance premiums go down.
However, in most cases Mortgage insurance remains in effect for the duration of the loan. That’s still a huge negative for FHA loans.
For example, a borrower who puts in a 3.5% down payment (the FHA main down payment) and has a mortgage tenure of more than 15 years will be subject to an annual MIP for the life of the loan.
Negative changes backfire. June 2013As the housing market is recovering from the Great Recession.
Before the change, FHA borrowers could see premiums drop when the original LTV ratio dropped to 78%.
New 2023 FHA MIP Chart
Here’s the new annual MIP chart for FHA loans. In addition to a MIP below 0.55% for a 3.5% down payment, borrowers placing a down payment of 10% or more will see their MIP drop to 0.50%.
MIPs are higher for larger loan amounts. 2023 corresponding loan amount of $726,200.
depend on L TVAnnual MIP of 0.70% or 0.75%, all of which are cheaper than 0.30%.
Those who go with 15-year fixed (unusual for FHA loans) will see FHA MIP as low as 0.15%.
Annual MIP for Improve Refinancing Staying the same at 0.55%, these transactions are incredibly popular when mortgage rates are low. But now there are very few.
In summary, this is a positive change for FHA loans and may make them cheaper than the corresponding loans sponsored by Fannie and Freddie.
And considering the past timely rental history (as of September 2022), it may be easier to qualify for an FHA loan.
