The Federal Housing Administration (FHA) has recently announced a significant point reduction in the Mortgage Insurance Premium (MIP) for FHA-insured loans. This reduction, which is effective for all FHA loans with a closing or disbursement date on or after January 27, 2017, is a result of the FHA's commitment to making homeownership more affordable for Americans.

The FHA Mortgage Insurance Premium (MIP) is an insurance policy that protects lenders against losses in case the borrower defaults on their loan. This policy is required for all FHA-insured loans, and the premium is typically added to the borrower's monthly mortgage payment.

Prior to the recent reduction, the MIP rate for most FHA loans was 0.85% of the loan amount. However, with the new reduction, the rate has been lowered by 30 basis points to 0.55%. This means that borrowers who take out an FHA loan can now save significant amounts on their monthly mortgage payments.

For example, if a borrower takes out a $200,000 FHA loan with a 30-year term, their MIP payment would have been $142 per month under the old rate. However, with the new 30 basis point reduction in MIP, their MIP payment would now be only $92 per month, resulting in a savings of $50 per month or $18,000 over the life of the loan.

This reduction in MIP is excellent news for homebuyers, especially those with lower credit scores or smaller down payments. It can also be a significant advantage for real estate agents, as it can help them market FHA loans to their clients with more confidence. Agents can now emphasize the affordability and accessibility of FHA loans, making them an even more attractive option for potential homebuyers.

Furthermore, the reduction in MIP could potentially make homeownership more accessible to first-time homebuyers, who often struggle with high down payment requirements and credit score standards. This change may encourage more people to consider buying a home, thereby stimulating the real estate market and boosting economic growth.

Who Qualifies for this Reduction?

To qualify for the reduced MIP, you must:

• Have your FHA loan originated on or before May 31, 2009
• Be currently paying MIP on your FHA loan
• Have an LTV ratio of 78% or less

If you qualify for the reduced MIP, you will see a drop in your monthly mortgage payment. For example, on a $250,000 loan with an LTV of 96.5%, the monthly MIP payment would drop from $262 to $234 – a savings of $28 per month.

This reduction is great news for FHA borrowers. If you have an FHA loan, be sure to check if you qualify for the reduced MIP rate.

Impact of the Reduction

The Federal Housing Administration ("FHA") has reduced the mortgage insurance premium (MIP) by 0.25%, or 25 basis points. This reduction will save the average FHA borrower $500 per year and will make FHA-backed mortgages more affordable and accessible to borrowers across the United States.

This is great news for both current and prospective homeowners who have been on the fence about whether or not to pursue an FHA-backed mortgage. With this reduction in MIP, more borrowers will be able to qualify for an FHA loan, and those who already have an FHA loan will see their monthly mortgage payments go down.

If you're thinking about buying a home, now is a great time to explore your options with an FHA loan. Contact a lending professional today to learn more about how this reduction in MIP can benefit you.

Also Read: Unlocking the Benefits of House Hacking with FHA Financing

What to Consider Before Applying for an FHA loan?

When you are thinking about applying for an FHA loan, there are a few things that you need to consider. The first is whether or not you are eligible for the program. To be eligible, you must:

• Be a citizen of the US or permanent resident alien
• Have a valid Social Security number
• Be of legal age to sign a mortgage in your state
• Have steady income and employment
• Have a good credit history

If you meet all of these criteria, then you can move on to the next step, which is finding a lender that offers FHA loans. Not all lenders offer them, so it is important to do your research and compare options before making a decision. Once you have found a few lenders that offer FHA loans, you can compare interest rates and fees to find the best deal.

Once you have found the best lender for your needs, it is time to fill out the application. The application will ask for basic information about yourself and your finances. You will also need to provide documentation such as bank statements and pay stubs. Once you have submitted the application, the lender will review it and make a decision. If they approve your loan, then you will need to go through the underwriting process. This is where they will verify your income and employment, as well as verify your credit score and history.

After you have gone through the underwriting process and been approved for the loan, then it is time to close and sign the paperwork. This is the final step in the process and you will receive your loan funds soon after.

Conclusion

The FHA has taken great strides to help make homeownership more accessible for millions of Americans. With the 30 basis point reduction in MIP, borrowers may be able to qualify for a mortgage loan at a much lower cost than previously available. It is important to note that FHA loans still have fees and requirements that must be met before one can successfully apply, but this recent development coupled with other options like streamlining make it easier than ever to purchase or refinance a home using an FHA-backed mortgage loan.

For more such information or guidance on any process related to your home buying requirements, Jay Thomas Real Estate Team is always there to help! Reach us now!!