FHA Announces Mortgage Insurance Reduction
The Federal Housing Authority has announced it will reduce the amount of monthly mortgage insurance paid by home buyers. This announcement comes on the heels of Fannie Mae’s announcement of their new reduced 3 percent down payment requirement. The two programs are designed to help the doors of homeownership to swing open to hundreds of thousands more responsible, credit- worthy future homeowners.
It is with this goal in mind that Guaranteed Rate offers jargon-free information about FHA’s reduced monthly mortgage insurance. While the reduction in monthly mortgage insurance premiums (MIP) will make home ownership more affordable, there are some facts you should know about FHA’s new MIP rules:
Program Effective Date
The new rates went into effect January 26, 2015. For those currently purchasing or refinancing, case ID numbers must be released on or after the effective date in order to take advantage of the new reduced MIP.
New Mortgage Insurance Premium Rates
The new reduced rates are applicable only to those mortgages with amortization over 15 years. The new monthly mortgage insurance premiums effective January 26, 2015 are shown below:
With a loan amount of $625,500 or less:
- For loan-to-values at, or above, 95.01% will require .85% of the loan amount – down from 1.35%.
- For loan-to-values at, or below, 95.00% will require .80% of the loan amount – down from 1.30%.
With a loan amount above $625,500:
- For loan-to-values at, or above, 95.01% will require 1.05% of the loan amount – down from 1.55%.
- For loan-to-values at, or below, 95.00% will require 1.00% of the loan amount – down from 1.50%.
Loan-to-Value: This is what your home is worth versus what is owed.
New Requirement Frequently Asked Questions
I’ve just closed my FHA loan, does this rule apply to me?
Unless your FHA case number was obtained on or after the effective date, old MIP rates will apply.
The new MIP reduction does not apply to any loans closed, as a result of purchase or refinance, prior to the reduction effective date of January 26, 2015. If interested in learning more about your options, contact your chosen mortgage professional for more information.
I haven’t closed yet, can I take advantage of the new reduced premiums?
Yes; however, the cancellation and retrieval of a new case number will take time and can impact your closing date. A shift in closing date for a refinance will not be as problematic as with a purchase closing. If you are currently purchasing a home and would like to take advantage of the reduced MIP, it’s best to speak with your attorney and mortgage professional for the most responsible options.
Will my appraisal be valid if I obtain a new case number before closing?
Yes. FHA will allow use of your current property appraisal.
I closed my loan prior to the June 3, 2013 FHA mortgage insurance changes, can I take advantage of the reduced mortgage insurance option?
Yes. However, with the changes in the years required to pay mortgage insurance, you’ll be subject to the new mortgage insurance payment timelines as well as the reduced MIP.
As a refresher, the new rules regarding required years of mortgage insurance coverage are as follows:
- For those with a loan-to-value between 78 and 90 percent, monthly mortgage insurance will be required for at least 11 years or until the home is paid in full or sold.
- For those with a loan-to-value over 90 percent, insurance coverage will be required for the life of the loan or until the home is paid in full or sold.
For more information on how to take advantage of FHA’s reduced premiums, contact your mortgage professional for expert direction on how to best manage your home financing options.
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