On February 22, 2023, the Department of Housing and Urban Development released details of a long-anticipated plan to reduce the annual MIP (mortgage insurance premiums) that are currently charged to FHA borrowers by 30 Basis Points (0.3% of the loan balance).
The FHA mortgage insurance premium is the monthly fee homeowners pay to insure their mortgages. The fee is calculated as a percentage of the loan amount and paid in addition to the monthly principal and interest payments.
The annual FHA mortgage insurance premium will reduce from 0.85% to 0.55% for most new borrowers.
The National Association of REALTORS® applauded HUDs move to reduce the MIP for Federal Housing Administration loans, saying the financial relief will help more homeowners and buyers weather affordability challenges, and potentially save borrowers with FHA-backed mortgages hundreds of dollars a year.
FHA loans offer down payment options as low as 3.5% to first-time and low- to moderate-income home buyers. Eighty percent of FHA borrowers are first-timers, and more than 25% are minorities.
Homeownership is currently the principal source of wealth creation for most American households, but due to a nationwide shortfall in the supply of affordable homes, first-time homebuyers have struggled in recent years to achieve homeownership.
FHA loans offer a small down payment and more flexible underwriting, enabling credit worthy borrowers to begin building wealth through homeownership earlier than they might otherwise.
National Association of REALTORS President Kenny Parcell said in a statement: “Mortgage rates have doubled over the past year, and home prices have increased more than 30% in some counties. In this competitive market, new and low- to moderate-income buyers are often left behind.”
With a $400,000 FHA-insured mortgage, the MIP reduction could save a borrower approximately $1200 in the first year of homeownership.
The MIP reduction is the result of several factors: an improvement in the credit quality of borrowers in the FHA mortgage portfolio, home price appreciation, and significant refinance volume. As a result, the FHA’s mortgage insurance fund has seen gains in its capital reserves.
The FHA mortgage insurance premium reduction became effective in March, 2023.
Find more details about the FHA MIP reduction and savings on page 2 this month’s newsletter!
Contact me about specific loan programs for first time homebuyers available to you or someone you know!
Source: nar.realtor/magazine, nationalmortgageprofessional.com, https://www.mortgagenewsdaily.com/news/02222023-fha-mortgage-insurance