New FHA Mortgage Insurance Reduction: How Much Can You Save?

Posted by Laine Smith on 3/30/15 1:00 PM

Topics: Economy Home Buying

It’s now cheaper to get an FHA loan due to changes announced by the Federal Housing Administration in January 2015. The FHA made a significant reduction to mortgage insurance premiums (MIP) on all new FHA loans for the first time since 2001.

FHAMortgageInsuranceSavings

The reduction of MIP from 1.35% to .85% on 30-year fixed rate mortgages of $625,000 or less is designed to make homeownership more affordable for homebuyers looking for a low-down payment financing option.

The new MIP rate applies to all FHA loans, including the 203k refinance loan, a popular option for homeowners needing to perform renovations, FHA Streamline Refinances, and the Back to Work program for homebuyers with a recent bankruptcy, foreclosure or short sale.

Homeowners wishing to refinance with an FHA Streamline in order to take advantage of the lower MIP rate can bypass several items to make the refinance process easier. Borrowers refinancing with an FHA Streamline:

  • Do NOT need an appraisal
  • Do NOT need to prove qualifying debt ratios
  • Do NOT need to provide income verification
  • Do NOT have credit checks performed – payment history is used as an indicator for future loan performance

How Much Will You Save?

FHA-backed homeowners will save thousands over the life of their loans with the reduced rate of mortgage insurance premiums. For every $100,000 financed on a 30-year fixed rate mortgage, a homeowner will save $42 monthly, amounting to approximately $500 per year.

 

Homeowner Savings Under The 2015 FHA MIP Program

FHA Loan Size

Monthly Savings

Annual Savings

$100,000

$42

$500

$150,000

$63

$750

$200,000

$84

$1,000

$250,000

$104

$1,250

$300,000

$125

$1,500

$350,000

$146

$1,750

$400,000

$168

$2,000

$450,000

$188

$2,250

$500,000

$208

$2,500

$550,000

$229

$2,750

$600,000

$250

$3,000

$625,500

$261

$3,138

The best way to determine any potential money-saving opportunities for your home financing situation is to speak with a mortgage banker about your loan terms and whether you qualify for a reduction in your mortgage insurance premium. For more in-depth information about loan options and home financing, download our free Mortgage 101 Handbook.

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