The Federal Housing Administration (FHA) has made a major announcement that is set to revolutionize the world of homeownership. Department for Housing and Urban Development or HUD lowers mortgage insurance for FHA Loans. They are reducing the annual mortgage insurance premiums (MIP) by a substantial 30 basis points (0.3%) of the loan balance for FHA Loans. Thus, it is bringing the premium down from a high 0.85% to an affordable 0.55%. This change is expected to benefit up to an impressive 850,000 borrowers and save them an average of $800 per year on their mortgage payments. Moreover, it will also increase the purchase power of borrowers by a few thousands.
Annual Savings out of this World!
Think about the potential savings for someone with a $265,000 mortgage because HUD lowers the mortgage insurance for FHA loans. They’ll be able to pocket an extra $800 in just the first year of their mortgage alone. The National Median Home Price as of December 2022 is $467,700 mortgage for lenders. The savings will skyrocket to over $1,400 in the first year alone.
Furthermore, the savings don’t stop there. If you have a $500,000 loan, with a mortgage premium set at 0.55% annually, you can save an astounding $2,250 annually. And with a $600,000 loan, the savings will jump to a staggering $2,700 annually.
Not only does this reduction in the annual MIP bring substantial savings to borrowers. It also opens the door to homeownership for even more people. The new mortgage insurance premium reductions will take effect for mortgages endorsed for insurance by FHA on or after March 20, 2023. It will also make payments more affordable for those with current FHA loans at the higher premium through a streamline refinance.
Get Preapproved for a Higher Amount
HUD lowers mortgage insurance for FHA Loans resulting to lower your monthly payment and DTI. Hence, this will enable you to qualify for a higher loan amount. I know It might seem unreasonable to think that this reduction can have such an effect. But, trust us because we have been in this industry long enough to have seen this on several occasions. Borrowers had to sometimes put 5% down instead of 3.5% just to qualify for the home of their dreams due to the payment being too high.
Remember, your mortgage payment cannot exceed a certain percentage of your income and debt ratios. Thus, MIP reduction is such a big deal!
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The Takeaway
Because HUD lowers mortgage insurance for FHA Loans, this is a major win for anyone looking to buy a home with FHA Loans (click and read “Home Loan: No and Low Down-payment Options“). It is making homeownership more accessible and addressing the disparities in the industry by reducing the cost of mortgage insurance. Don’t miss out on this incredible opportunity to save big on your mortgage and achieve your dream of homeownership. The FHA’s reduction in the annual mortgage insurance premium MIP is a game-changer that you won’t want to miss. This is a good opportunity for a first-time homebuyer, looking to refinance your current mortgage, or simply interested in reducing your monthly payments. You can really qualify for a higher amount and not only will you be saving money on your payment. Let’s get started today!