FHA Lowers Mortgage Insurance Premium By 0.25 Basis Points

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FHA Lowers Mortgage Insurance Premium By 0.25 Basis Points

This BLOG On FHA Lowers Mortgage Insurance Premium Was UPDATED On November 24th, 2018

This blog is a rewrite and updated blog from January 2017:

FHA Lowers Mortgage Insurance Premium by 0.25 basis points.

  • This announcement came from HUD that for 2017, FHA Lowers Mortgage Insurance Premium
  • This is great news for home buyers and those borrowers planning on refinancing their mortgage loans
  • The lowering of the FHA annual mortgage insurance premium is the second reduction of the annual FHA mortgage insurance premium in the past two years
  • HUD requires mandatory FHA mortgage insurance premium on all 30 year FHA fixed rate mortgage loans

HUD Does Mortgage Insurance Premium Work

Here is how it works:

  • HUD requires a one time Upfront FHA Mortgage Insurance Premium of 1.75% on a home purchase
  • This can be rolled into the mortgage loan balance
  • HUD also requires a 0.85% annual mortgage insurance premium for all 30 year fixed rate FHA Loan for the term of the loan
  • On Monday January 9, 2017, FHA Lowered Mortgage Insurance Premium 0.25 basis points to 0.60% on all 30 year fixed rate FHA insured mortgage loans
  • This is a huge savings for first time home buyers and homeowners refinancing their home loans into a FHA Loan

FHA Lowers Mortgage Insurance Premium Is Great News For First Time Home Buyers

HUD announced Monday that it is cutting its annual mortgage insurance premiums for the second time in two years.

  •  The FHA last cut premiums two years ago
  • The last time FHA Lowers Mortgage Insurance Premium, the mortgage insurance premium went from 1.35% to 0.85% which was a reduction of 0.50%
  • That lowering of 0.50% of FHA Annual Mortgage Insurance Premium spiraled a wave of refinancing of homeowners nationwide

Barack Obama Lowers FHA MIP Prior To Leaving Office But Trump Raises It Back Up

Barack Obama Administration lowered FHA annual mortgage insurance premium 0.25% from 0.85% to 0.60%:

  • This was to stimulate home sales, especially for first time home buyers
  • The reduction of FHA mortgage insurance premiums was mainly intended on subduing fears of spiking mortgage rates and the slowdown of the housing market
  • The change of FHA Lowers Mortgage Insurance Premium can easily be retracted after Donald Trump gets sworn in as President of the United States

Trump Administration Against Lowering Of FHA MIP

The Republican Party generally is against lowering FHA mortgage insurance premiums:

  • This is because they believe that by lowering FHA mortgage insurance premium, it puts the public at risk of mortgage foreclosures
  • The United States Department of Housing and Urban Development, or HUD, is in charge of the Federal Housing Administration or FHA
  • The HUD Secretary is in charge of creating the fees of mortgage insurance

HUD Secretary Ben Carson Planning On Raising Lowered FHA MIP

The HUD Secretary Elect is Ben Carson who President Elect Donald J Trump selected. Ben Carson is scheduled to appear before confirmation hearings on Thursday January 12, 2017

  • The fact that FHA Lowers Mortgage Insurance Premium will most likely hurt investors of mortgage bonds
  • This is because it expedites the payment of some securities
  • Back in January of 2015, a when FHA Lowers Mortgage Insurance Premium, securities of Ginnie Mae sold off on the news of the steep lowering of the mortgage insurance premiums
  • However, it was a steeper reduction of the FHA mortgage insurance premium at that time

After today’s announcement of FHA Lowering FHA mortgage insurance premium to 0.60%, stock of private mortgage insurance companies Radian, MGIC, and Essent Group Limited plummeted between two to four percent. The cut of FHA mortgage insurance premium is going to take effect on January 27, 2017.

Mortgage Rates Sky Rocketed On News Of President Elect Donald Trump

Mortgage Interest Rates have sky rocketed after the election and on the news that Donald J. Trump will be our next President of the United States.

  • Mortgage Interest Rates averaged 4.32% compared to an average mortgage interest rate of 3.71% the same time last year

FHA Mortgage Insurance Premium

FHA is not a mortgage lender.

FHA is a government agency under the United States of Housing and Urban Development:

  • Private mortgage lenders such as banks and mortgage companies originate, fund, and service FHA Loans. FHA’s role and function is the following:
    • FHA will insure FHA Loans that private lenders and banks originate and fund
  • In order for FHA to insure a defaulted or foreclosed FHA Loan, the Lender needs to follow HUD Guidelines. FHA insures the defaulted FHA Loan
  • There is a one time upfront mortgage insurance premium of 1.75%
  • There is an annual mortgage insurance premium for the lifetime of a 30 year fixed rate loan
  • The annual mortgage insurance premium of 0.85% has just been reduced now to 0.60% effective January 9, 2017
  • In order to take advantage of the 0.60% Annual FHA mortgage insurance premium, borrowers need to refinance their current FHA Loans
  • Homeowners can refinance their FHA Loan with a FHA Streamline Refinance Mortgage which requires no income verification, no appraisal, and no credit scores and take advantage of the lower FHA Annual Mortgage Insurance Premium
  • In order to be able to do a FHA Streamline Refinance, the borrower needs to have a net tangible benefit
  • The reduction of the borrowers housing payment has to be at least 5% lower than what the borrower is paying now

UPDATE

Unfortunately, the Trump Administration has raised the FHA MIP back to 0.85%. This blog was an updated blog from a previous blog written when FHA MIP dropped temporarily to 0.85%.

Homeowners who want to see if they benefit and can save money with refinancing, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com . We are available 7 days a week, evenings, weekends and holidays.

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