UPDATE: As of January 20, 2017, the Department of Housing and Urban Development has announced that the reduction of the FHA Mortgage premium slated to take effect on January 27, 2017 has been suspended indefinitely.
Here, you can get the details on the FHA Mortgage Insurance Rate changes initially proposed in early January 2017. Please note that as of January 20, 2017, these changes have been placed on hold and the lowered annual MIP premiums for FHA mortgages are no longer available.
Feel free to contact us at (518) 782-1202 with any questions you might have.
Announced this month (January 2017), FHA issued Mortgagee Letter 2017-01, which lowers the annual MIP premium for Forward Mortgages. The reduction is anywhere from 20 bps to 45 bps, depending on the Loan to Value and term of the loan.
Below is a chart that shows the old vs. new comparison on what has changed with these reduced rates. FHA announced these lowered MIP rates will be effective on closing/disbursement dates on or after January 27, 2017.
Most of our local FHA homeowners that finance the maximum amount for an FHA loan fall into the <= $625,000 loan amount with a term of greater than 15 years and a Loan To Value (LTV) of over 95%. This would give the home-owner a reduced MIP of 60 bps vs. 85 bps from before the change.
The reduction in monthly MIP means the homeowner will pay less per month. Let’s use a standard example. For simplicity and compliance sake, we will leave out interest rate, principal and interest, taxes, homeowners insurance, and only focus on the new change.
Let’s also assume that the total loan amount after the down-payment and any upfront mortgage insurance is $100,000 to make our numbers easier to review.
$100,000 Loan Amount
Current Annual Mortgage Insurance = 0.85% of Loan Amount
$100,000 X 0.85% = $850 (Or $70.83 per Month)
$100,000 Loan Amount
New Annual Mortgage Insurance = 0.60% of Loan Amount
$100,000 X 0.60% = $600 (Or $50.00 per Month)
Home-buyers can see the savings of $250 per year on a $100,000 loan amount. With a loan amount of $200,000, the savings double at $500 annually.
Please see Mortgage Letter 2017-01 that was released on January 9th, 2017 by the U.S. Department of Housing and Urban Development for the official notice of this change to FHA MIP rates.
Think an FHA mortgage might be the right option for you? Wondering if you might be able to save with these new FHA mortgage insurance premiums in effect?
Interested in learning more about FHA mortgages and the other NY home loan options that might be available to you? Check out the following resources for more information: