Buying and moving into a new home is one of life’s great experiences, especially if you’re buying your first home. From getting that pre-approval to the “yes!” response on an offer to closing and moving in, every step is exciting. And while the process is engaging and fun, it’s important to prepare for moving day […]
Understanding the New FHA Mortgage Insurance Premium
Do you have an FHA Kansas City home loan? Then listen up! The FHA has reduced its mortgage insurance premiums for U.S. homeowners using the agency’s flagship mortgage programs. Although you may not be able to cancel your mortgage insurance, you now have a way to lower your monthly payment. First-time homebuyers can also finance new homes for less than before.
What is the FHA Mortgage Insurance Premium?
The Federal Housing Administration, or FHA, is a mortgage insurer. Just like other insurers, the FHA collects regular payments known as “premiums” which fund the claims it pays to actual lenders. FHA mortgage insurance premiums (MIP) are split into two parts:
- Annual premiums
- Upfront premiums
For the first time in over 10 years, the FHA has decreased their annual mortgage insurance premium rate. The upfront insurance for home loans in Kansas City remains the same at 1.75%. Since it does not count against your loan-to-value, most people will add their upfront MIP to their mortgage amount.
What This Change Means for Borrowers
On average, current borrowers will pay significantly less for their financing than those who applied for a mortgage just six months ago. If you are ready to purchase a home or refinance your current FHA loan, you will certainly see the savings. The new premium will help expand many people’s access to mortgage credit and is expected to lower the cost of housing for the approximately 800,000 households who use FHA annually.
The premium change applies to purchases, and cash-out and streamlined refinances. FHA borrowers can now lower their mortgage insurance premium and their interest rate by .5% when they refinance. The new premium will make homeownership more affordable for over two million Americans in the next 3 years.
Currently there are many borrowers who can lock a 30 year, fixed-rate home loan in Kansas City with a FHA interest rate of less than 4%. Keep in mind, you will still need to meet the loan’s minimum down payment. However, you will now be paying .5% less on your required FHA mortgage insurance premium.