January 8, 2015 by Michael Mullin
The President announced on January 7, 2015 that FHA will be decreasing its annual mortgage insurance premiums on most applications from 1.35% to .85% of the Base Loan Amount.
That may not sound like much but if you are borrowing $200,000 on an FHA loan that translates to a savings of $83/mo. or almost $1,000 a year. Or you can turn the equation around and now you can afford a more expensive home for the same monthly payment!
To find out how much more home you’d qualify for just shoot me a quick email m.mullin@fpfmail.com
The new insurance rate will also include borrowers using FHA mortgages to refinance their existing home loan.
What is FHA Annual Mortgage Insurance?
There are two types of FHA mortgage insurance – an upfront component that is usually financed into the loan amount, and an annual premium that is paid with your regular monthly mortgage payments.
The insurance premiums are kept in a fund and used to repay mortgage lenders for any loses suffered if you default on your FHA loan.
It’s because of this insurance program that banks are willing to lend to borrowers with such a minimal down payment.
How Do You Qualify For The Lower Mortgage Insurance?
HUD (the agency responsible for FHA loans) issued Mortgagee Letter 2015-01 on Friday January 9 stating that the lower mortgage insurance rates will apply for any “case numbers assigned on or after January 26, 2015.”
Case numbers are typically ordered by your lender at the time of receiving your application in the case of a refinance loan or at the time of receiving a fully executed purchase and sale contract in the case of loan to buy a home.
This presents a challenge for anyone that already has an FHA loan in process and the Case ID assigned. If you are already in process with a lender you will need to talk to them about cancelling your existing Case ID and requesting a new one after January 25. Keep in mind that could cause a delay in your process and impact things like your rate lock and the contracted close date.
But with $80 or more per month at stake, it would be a shame to find out your lender wasn’t paying attention and locked you into a higher payment just a few days ahead of the new lower rate!
To find out how this new guideline applies to your specific situation feel free to call 541-508-5089 or send a question to m.mullin@fpfmail.com.
About Michael
Author: Michael Mullin (NMLS #11911) has been helping families with FHA, VA, USDA and Conventional loans for 24 years. Want help with buying again after a short sale, foreclosure, or bankruptcy? His passion is educating borrowers so they can make smart decisions about their financing options. He is a Branch Manager and Mortgage Loan Originator with First Priority Financial, Inc. and is licensed in CA, OR and WA. To get more information call (541) 508-5089 or email m.mullin@fpfmail.com.