As of 01/20/2017 FHA has put a hold on the update below. We will update this if/when the situation changes.
FHA is lowering monthly mortgage insurance costs by 29%. In layman unfriendly terms, the mortgage insurance factors used to calculate monthly mortgage insurance on an FHA are decreasing by 25 basis points on the 3.5% down/30 year fixed FHA loan program (other programs and high cost loans have different change schedules). The change is effective for all FHA loans that close on or after January 27th, 2017. Click HERE for more details and a chart of all factors (before and after the change).
FHA Payment Before and After the MI Reduction HUD predicts that the MI reduction will save the average FHA homebuyer $500/year in mortgage insurance costs. Check out how payments compare before and after the change (both examples are at the same price, down payment and interest rate): Before MI Reduction:
$1597.69 (Monthly mortgage insurance = $170.89) After MI Reduction:
$1547.43 (Monthly mortgage insurance = $120.63)
*both examples are based on a $250k purchase with 3.5% down at 4.25% on a 30 year fixed and 5.57% APR FHA Payment Pre & Post Election With post-election mortgage interest rates up, the FHA mortgage insurance reduction has somewhat neutralized much of the rate increase. Check out how payments pre and post-election compare now that monthly mortgage insurance will be cheaper on FHA loans as of 01/27/2017. Pre-Election FHA Payment @ 3.75% Before Reduction:
*example based on a $250k purchase with 3.5% down at 3.75% on a 30 year fixed and 4.377% APR and pre-01/27/17 MI rates
Post-Election FHA Payment @ 4.25% After Reduction:
*example based on a $250k purchase with 3.5% down at 4.25% on a 30 year fixed and 5.57% APR and post 01/27/17 MI rate
2017 has been a year of positive change in the mortgage world. It’s only week 2! Excited to see what the rest of the year has in store.
By Jeremy House