FHA Mortgage Insurance Premium

White House Lowers FHA Mortgage Insurance To 0.85% From 1.35%

Gustan Cho Associates are mortgage brokers licensed in 48 states

This ARTICLE On White House Lowers FHA Mortgage Insurance To 0.85% From 1.35% Was PUBLISHED On January 8th, 2015

To stimulate homeownership for first time home buyers and seasoned home buyers, President Barack Obama announced that HUD, the parent of FHA, who is the mortgage insurance provider for FHA loans, will be lowering their current 1.35% annual mortgage insurance premium to 0.85%.

  • This is a huge reduction and savings for the homeowner
  • President Obama’s mission is to reward creditworthy borrowers by expanding responsible mortgage lending
  • This is so they can afford a home and realize the American Dream of homeownership
  • President Barack Obama will be discussing the housing market at a scheduled speech today in Phoenix, Arizona
  • Phoenix, Arizona is one of the nation’s most affected regions due to the real estate market collapse
  • The President’s new action will enable over two million Americans to affordable homeownership in the next three years
  • This is according to United States Department of Housing and Urban Development Secretary Julian Castro

In this article, we will discuss and cover White House Lowers FHA Mortgage Insurance To 0.85% From 1.35%.

What Does Obama’s Executive Action Mean To Mortgage Industry

Why White House Lowers FHA Mortgage Insurance To 0.85% From 1.35%

This is one of the most positive news for mortgage industry professionals in all ends.

  • Mortgage professionals cheered at the news and sent memorandums to all of their staff
  • This news came at the right time and if everything goes according to the President’s plan, the new FHA mortgage insurance annual premium of 0.85% could go into effect by the start of the spring home buyer season
  • This news will skyrocket home sales, possibly to record levels

First time home buyers who have been contemplating buying a home will definitely pull the trigger.

FHA Loans Versus Conventional Loans

FHA loan is a great loan program where it offers first time home buyers and seasoned home buyers with less than perfect credit, higher debt to income ratios, or those needing a non-occupant co-borrower to qualify for a 3.5% down payment home purchase mortgage loan.  However, those with perfect credit can opt for an FHA loan instead of a conventional loan but in most cases stay away from FHA loan mainly due to the hefty 1.35% mortgage insurance premium.  Now with Obama’s new 0.85% annual mortgage insurance premium, many homebuyers who qualify for a conventional loan may decide to go with an FHA loan due to the lower annual mortgage insurance premium because it may make much more sense.  Conventional loan borrowers who have a loan to values, LTV, higher than 80% LTV are required to have private mortgage insurance.  Private mortgage insurance varies depending on the private mortgage insurer.

Private Mortgage Insurance On Conventional Loans

What is the difference between FHA loans and conventional loans

Private mortgage insurance can range from 0.40% to over 0.80%.  Another note is that conventional mortgage rates are higher than FHA mortgage rates.  To get the best conventional mortgage rates, a conventional mortgage loan borrower needs a credit score of 740 FICO.  The lower your credit score, the higher your conventional mortgage rate.  The minimum credit score you need to qualify for a conventional loan is 620 FICO.  A 620 FICO credit score is considered low when it comes to conventional loans.  A home buyer with a 620 FICO credit score may get quoted a conventional mortgage rate of higher than 5.0%.  However, that same home buyer will probably get quoted a 4.0% mortgage rate with an FHA loan.  A 4.0% FHA mortgage rate with a 0.85% annual mortgage insurance premium is not bad due to the great savings in the FHA mortgage insurance premium.

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