The Federal Housing Administration (FHA) has made a major announcement that is set to revolutionize the world of homeownership. They are reducing the annual mortgage insurance premiums (MIP) by a substantial 30 basis points (0.3%) of the loan balance for FHA Loans, 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, and if this is not enough…, it will also increase the purchase power of borrowers by a few thousands, sometimes enough to get them over the line.
Annual Savings out of this World!
Think about the potential savings for someone with a $265,000 mortgage – they’ll be able to pocket an extra $800 in just the first year of their mortgage alone. For those with a $467,700 mortgage, which is the national median home price as of December 2022, the savings will skyrocket to over $1,400 in the first year alone.
And 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, but 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
With the lower mortgage insurance premium, your monthly payment is lower, (hence your DTI), and 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, 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, which is why this MIP reduction is such a big deal!
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The Takeaway
The HUD’s recent announcement is a major win for anyone looking to buy a home with FHA Loans. 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. Whether you’re a first-time homebuyer, looking to refinance your current mortgage, or simply interested in reducing your monthly payments, the FHA’s reduction in the annual mortgage insurance premium MIP is a game-changer that you won’t want to miss. Not only will you be saving money on your payment, you can qualify for a higher amount. Let’s get started today!