The U.S. Department of Housing & Urban Development (HUD), through the Federal Housing Administration (FHA), has announced a 30-basis-point reduction to the annual mortgage insurance premiums (annual MIP) charged to homebuyers who obtain an FHA-insured mortgage.
The MIP will be reduced from 0.85% to 0.55% for most homebuyers seeking an FHA-insured mortgage, which could mean an estimated savings of $678 million for American families in aggregate by the end of 2023 alone. The reduction will benefit an estimated 850,000 borrowers over the coming year, saving these families an average of $800 annually.
Speaking at the Mortgage Bankers Association’s Servicing Solutions conference in Orlando on Wednesday, FHA Commissioner Julia Gordon began her speech with some levity.
“The great news is that no longer your first question to me in any forum has to be when are you going to reduce the mortgage insurance premium on FHA mortgages because the answer is, we are doing that today,” she told attendees.
The 30-basis-point annual MIP reduction will apply to almost all Single-Family Title II forward mortgages insured by FHA. Further, the reduction applies to all eligible property types, including single family homes, condominiums, and manufactured homes, all eligible loan-to-value ratios, and all eligible base loan amounts.
“At a time when budgets are tight and homeownership is out of reach for too many, FHA’s premium reduction will allow more households to access the stability and wealth creation of homeownership, particularly the first-time homebuyers and families of color who rely heavily on affordable FHA-insured mortgages,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “For many families, the savings will make the difference in their ability to purchase the home of their choice.”
“The lower premiums will expand homeownership opportunities by lowering mortgage payments for qualified FHA borrowers, providing critical relief from the steep rise in mortgage rates and home prices just in time for the spring buying season. This will especially help minority homebuyers and low-and moderate-income households who are predominantly served by FHA loans,” said MBA’s President and CEO Bob Broeksmit at the conference.
There will be no changes to the up-front mortgage insurance premiums at this time, only the up annual premium calculation.