On February 22, the U.S. Department of Housing and Urban Development (HUD) announced exciting news: they will be lowering annual mortgage insurance premiums (MIPs) for certain home loans – a move that is estimated to save FHA loan borrowers an average of $800 per year!

What Is MIP?

Mortgage Insurance Premium (MIP) is mandatory for all Federal Housing Administration loans, regardless of the down payment. The lenient qualification requirements, such as a lower credit score, are made possible by MIP payments and vary between upfront fees at closing and annual installments broken up into monthly mortgage payments. The cost of an annual MIP depends on each borrower’s loan-to-value ratio (LTV), loan amount, and length of the mortgage term.

How Much Will I Save?

The cost of an MIP is a percentage of your loan balance. The FHA has announced that it will reduce MIP by 0.3%, which translates to 30 basis points (BPS). This means if you were previously paying between 0.8%-0.85% for your loan’s MIP cost, now you can expect to pay only 0.5-0.55%.

HUD’s press release illustrates that if a homeowner has a house priced at $265,000, they could save around $800 every year. For homeowners with an estimated home value of $467,700 – equal to the national median in December 2022 – savings may total up to more than $1,400!

Why Are They Reducing Costs?

The HUD press release stated this reduction “builds on a range of steps the Department of Housing and Urban Development has taken to make homeownership a reality for more Americans”.

This cost reduction in FHA loans could be a significant relief for numerous Americans, especially those with low-income and first-time home buyers. In the last year, we saw an increase in housing costs and mortgage rates which made it difficult to purchase a home. This change can provide more opportunities for people to own their own homes despite these economic challenges.

Who Is Affected By This Change?

If you’re an FHA borrower who is considering refinancing their current loan, or a homebuyer hoping to use an FHA loan for your next purchase, this change affects you. The reduction applies to single-family homes, manufactured homes, and condominiums that are insured by the Federal Housing Administration. Don’t miss out on these savings – take advantage of this opportunity now.

It is important to note that in order for current FHA borrowers who own a home to benefit from this reduction, they must refinance their FHA loan.

Where Can I Get More Information?

Sword Mortgage is here for you. Whether you are looking to purchase a home with an FHA loan or you’re a current homeowner, we can answer questions and help you determine the next steps. If you’re considering using an FHA loan to purchase a home and are ready to take advantage of this reduction, click here to start your application online or call us today at (770) 757-5750.