If you were considering a new FHA loan you are in luck. A half a percentage point reduction is expected to the current annual FHA mortgage insurance premium charge.
FHA Mortgage Insurance Premium
That is a 0.5 percentage-point drop in annual premiums, from 1.35% to 0.85%. The White House estimates this will save nine hundred ($900) dollars a year for the average new borrower. Although the annual premium is expected to drop, the upfront premium percent will not be changed from its current 1.75%.
Sometime today, President Obama is expected to announce the half point reduction in the Federal Housing Administration’s annual insurance premium during a housing policy speech in Phoenix. News of the announcement were based on unnamed sources while Housing and Urban Development Secretary Julian Castro confirmed the premium reduction in a prepared statement late Wednesday.
“This action will make home ownership more affordable for over 2 million Americans in the next three years,” Castro said. “Since 2009, the Obama administration has taken bold steps to reduce risks in the mortgage market and to protect consumers. These efforts have made it possible to take this prudent measure while also ensuring FHA remains on a positive financial trajectory. By bringing our premiums down, we’re helping folks lift themselves up so they can open new doors of opportunity and strengthen their financial futures.”
No effective date for the reduction has been announced. It’s understood that it will be at any moment.
Unfortunately, if you are an existing FHA customer there does not seem to be any benefit for you. The question will be if you pursue an FHA Streamline refinance will you get the benefit of the new lower FHA mortgage insurance premium? That remains to be seen.