Monday, January 26, 2015

FHA Premiums to Drop by Half Percent on Certain FHA Loans

As of today, January 26, 2015, the annual mortgage insurance premium on an FHA 30 year term just got a little more affordable. News of the new MI premiums broke on January 7th and President Obama confirmed this in a speech on housing policy the following day. In reasoning according to The White House press release...
"there’s more work to do: too many creditworthy families who can afford—and want to purchase—a home are shut out of homeownership opportunities due to today’s tight lending market."

There seems to be some mixed sentiment whether or not the reduction is a sound choice for the fiscal health of the FHA loan program which has been in the habit of increasing the rates over the last several years but of course only time will tell. Although I agree it will make a positive impact to the affordability for potential homeowners who are feeling the pinch of rising rents in the Portland Metro Area; the issue of the duration of the MI remains a concerning factor. As that annual mortgage insurance premium will remain in effect for the life of the loan for all loans where the loan to value is 90% or more, under 90% and your MI will cancel after a minimum of 11 years. Of course not everyone purchasing a home is going to commit to a mortgage for 30, or even 15 years, so if your looking to get your foot in the door, it is just that... a means to an end. Do proceed with caution if you're looking to go through with a streamline refinance, if your original loan was originated before June 3, 2013 when the new MI duration went into effect that reduction to the payment will likely be negated under the newer structure.

Other low down financing options such as the VA Loan for qualified Veterans, USDA Rural as eligible, MyCommunity, or Conventional with private mortgage insurance may be a better fit, and a side by side comparison will guide you in choosing the right home loan based on your individual needs and goals. If you would like more information or to apply for any of these loan products contact me today!


Additional Resources:

White House Press Release

HUD Press Release

Mortgagee Letter 2015-01

FHA Loan Limit Lookup