FHA Mortgage Insurance Premiums To Be Lowered
Lower FHA Mortgage Insurance Premiums To Save Buyers $900 Per Year
FHA Mortgage Insurance Premiums Being Lowered
Beginning in late January 2015, home buyers using government-backed loans to buy a house would benefit by lower fha mortgage insurance premiums on 30 year loans. Currently PMI mortgage insurance rates on 30 year loans stand at;
- 30-year loan terms with loan-to-value over 95% : 1.35 percent annual MIP
- 30-year loan terms with loan-to-value under 95% : 1.30 percent annual MIP
The plan being enacted by the Federal Housing Administration will reduce its annual mortgage insurance premiums on 30 year loans by 0.5 percentage points.
Effective late January 2015 Mortgage Insurance Premiums (MIP) on 30 year loans will be;
- 30-year loan terms with loan-to-value over 95% : .85 percent annual MIP
- 30-year loan terms with loan-to-value under 95% : .80 percent annual MIP
Note – The Upfront Mortgage Insurance Premium (UFMIP) under the FHA’s new plan for 2015 will remain at 1.35%. The UFMIP is paid at the time of closing and is traditionally rolled into the buyers mortgage.
The FHA estimates the reduction will save new home buyers about $900 to $1200 a year. The program to lower FHA mortgage insurance fees should have a favorable, although modest, impact on home sales to first time home buyers.
Present homeowners refinance into an FHA mortgage that required FHA mortgage insurance would also benefit from the change. Although the rate will be lowed, the rate for PMI mortgage insurance is still higher than historical rates.
The rate was initially increased to raise FHA capital reserves that were hart hit during the housing crisis. Could the FHA mortgage insurance rate go lower? Hopefully it will as capital reserves of FHA meet the levels required for the future.
The PMI mortgage insurance reduction, appears to be another step to get more homes sold in the U.S.
Existing homes sales for 2014 are projected at 4.94 million, down from 5.1 million in 2013. Analysts continue to suggest sales of 5.5 million homes are normal in a healthy housing market. The “about to be” enacted FHA mortgage insurance premium reduction will help, but only modestly. The real key is in wage growth and a access to mortgage money. If potential home buyers aren’t able to fund down payments and meet the current debt to income ratios, returning to “normal” will continue to be a dream.
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