FHA Reduces Annual Mortgage Insurance Premium

home-buyer-fhaPresident Barack Obama announced a plan to make home ownership more affordable and accessible for creditworthy individuals and families by lowering the charges associated with annual mortgage insurance premiums. This plan will particularly benefit first-time home buyers and home buyers with lower household incomes.

In response, the Federal Housing Administration (FHA) has reduced its annual mortgage insurance premium (MIP) by 0.5 percentage point, from 1.35% to 0.85%. According to the White House Fact Sheet on this announcement, this reduction will translate into an average savings of $900 annually on their mortgage payment. Existing homeowners who refinance into an FHA mortgage will see similar reductions to their mortgage payments as well.

What does this mean for you? This reduction in annual MIP on FHA loans presents an opportunity for those who may not have qualified at the higher annual MIP amount—aspiring homeowners like  you who have been waiting on the sidelines to buy a new home. In addition, the White House Fact Sheet noted:

  • More than 800,000 FHA borrowers are projected to take advantage of these lower rates in the first year, saving millions of dollars in total.
  • Lowered premiums will create opportunities for 250,000 new homeowners to purchase a home over the next three years.
  • The new home buying activity and benefits of the cost savings to borrowers will help further strengthen the housing market.

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