Thursday, January 8, 2015
FHA Lowers Mortgage Insurance
Mortgage Insurance premiums or (MIP) is typically added onto a buyers monthly mortgage payment when the down payment on a property is less than 20%. The premium is paid one time up front when a borrower closes on the loan and in monthly installments after. It may be removed at some point after the value of the property increases by enough to show that there is at least 20% equity in it.
After raising them six times, the Obama administration is reversing course and rolling back mortgage insurance premiums charged by the Federal Housing Administration by enough to save homeowners an average of $900 a year.
In a move expected to bring 250,000 first-time homebuyers into the market, FHA will reduce annual premiums by 0.5 percent, to 0.85 percent. That can make homeownership more affordable for more than 2 million homeowners in the next three years, Secretary of Housing Julian Castro said.
FHA’s upfront premiums of 1.75 percent will not change. So a first-time homebuyer taking out a $150,000 mortgage will pay $2,625 upfront and $1275 a year in premiums for access to FHA mortgage programs that let them purchase a home with just 3% down. (Today, the same homeowner pays $2,430 a year in annual premiums).
Last month, Fannie and Freddie’s federal regulator said the mortgage giants are looking forward to any increase in guarantees of new mortgages with low down payments.