FHA Lowers Annual Mortgage Insurance Premiums (MIP)
February 26, 2023
The Federal Housing Administration has announced a significant change in FHA single-family home loan policy, which could result in savings for home buyers purchasing homes with FHA mortgages.
An FHA press release issued on February 22, 2023, announced a reduction in the annual FHA mortgage insurance premium, also known as FHA annual MIP. This is expected to lower costs for FHA loans by as much as $800 a year for typical mortgages and “even more” for larger home FHA mortgages.
FHA mortgage insurance is typically required for purchase and refinance transactions. It is applicable for either 11 years or the entire term of the loan, depending on the loan-to-value ratio and other factors.
The Numbers According to the FHA and HUD
The FHA press release notes that the median home price in the United States (as of the fourth quarter of 2022) is $467,700, “meaning that HUD’s action would save a buyer at this price point more than $1,400 a year” according to the federal government.
“In total,” the press release adds, “this action will help low- and moderate-income Americans save an estimated $600 million in the next year alone and many billions over the next decade.”
When The Policy Takes Effect
The new FHA loan policy for lower annual MIP takes effect for all loans closed on or after March 20, 2023. If your loan is closed before this date, the changes will likely not affect your transaction.
Some Home Loan Programs Are Not Included
As of March 20, 2023, FHA loan Upfront Mortgage Insurance Premiums or FHA UFMIPs will be charged 175 Basis Points (bps) (1.75%) of the Base Loan Amount, according to HUD.gov. Remember that a basis point is 100th of one percent when calculating the premium.
There are exceptions to the new policy:
FHA annual MIP for loans 15 years or less will range between 15 and 65 basis points. There are exceptions to this:
An FHA press release issued on February 22, 2023, announced a reduction in the annual FHA mortgage insurance premium, also known as FHA annual MIP. This is expected to lower costs for FHA loans by as much as $800 a year for typical mortgages and “even more” for larger home FHA mortgages.
FHA mortgage insurance is typically required for purchase and refinance transactions. It is applicable for either 11 years or the entire term of the loan, depending on the loan-to-value ratio and other factors.
The Numbers According to the FHA and HUD
The FHA press release notes that the median home price in the United States (as of the fourth quarter of 2022) is $467,700, “meaning that HUD’s action would save a buyer at this price point more than $1,400 a year” according to the federal government.
“In total,” the press release adds, “this action will help low- and moderate-income Americans save an estimated $600 million in the next year alone and many billions over the next decade.”
When The Policy Takes Effect
The new FHA loan policy for lower annual MIP takes effect for all loans closed on or after March 20, 2023. If your loan is closed before this date, the changes will likely not affect your transaction.
Some Home Loan Programs Are Not Included
As of March 20, 2023, FHA loan Upfront Mortgage Insurance Premiums or FHA UFMIPs will be charged 175 Basis Points (bps) (1.75%) of the Base Loan Amount, according to HUD.gov. Remember that a basis point is 100th of one percent when calculating the premium.
There are exceptions to the new policy:
- Streamline Refinance Mortgages refinancing previous FHA loans on or before May 31, 2009
- Simple Refinance Mortgages refinancing previous FHA loans on or before May 31, 2009
- Hawaiian Home Lands (Section 247)
- Indian Lands (Section 248)
FHA annual MIP for loans 15 years or less will range between 15 and 65 basis points. There are exceptions to this:
- Streamline Refinance loans refinancing previous FHA loans on or before May 31, 2009
- Simple Refinance Mortgages refinancing previous FHA loans on or before May 31, 2009
- Hawaiian Home Lands (Section 247)
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