FHA Mortgage Insurance Reduction January 27 2017

FHA Mortgage Insurance Reduction January 27 2017

(guitar music) – Welcome to another
mortgage loan update report. Great news, FHA announced
they're gonna reduce their annual mortgage insurance premium effective January 27th, 2017. Hello, I'm John Thomas with
Primary Residential Mortgage here to give you this update. Well, this is awesome news, guys. The HUD secretary Julian Castro announced Monday, January 9th, 2017 that effective with
mortgagee letter 2017-01, the FHA is going to reduce their annual mortgage insurance
premium by a quarter percent on all loans closed or dispersed on or after January 27th, 2017. So, the current annual
mortgage insurance premium for a typical FHA loan
with 3.5% down is 0.85%. So, on January 27th
that's gonna drop to 0.6% so that is great news. So, if we look into this in more detail, if you look on the screen the
premium table is up there. You can see that the loan
amount and how much you put down affects the MIP. So, if we look at terms
greater than 15 years, so that's 20, 25, and 30, if you put down 5% or more on a loan less than 625,500 you're currently paying 0.85,
0.80% or 80 basis points.

That's gonna drop to
0.55% or 55 basis points. Now, if you put down less
than 5% which is typical, most people only put the minimum 3.5%, you're currently paying
0.85 or 85 basis points, that's gonna drop to
0.6 or 60 basis points. Now, if you have a high
balance loan, you can see there that the drop is even more significant. If you're putting down 5% or
more on a high balance loan it's 100 basis points
that's dropping to 55 and if you're putting less than 5% down on those high balance loans it's dropping from 105 to 60.

Now, if you get a 15 year or less term the MI is already lower,
it's going even lower. As you can see there on the table, dropping for 10% or more down it's dropping from 45 to 25. Less than 10%, it's dropped from 70 to 50. So, great news there on the FHA. Now, the up front
mortgage insurance premium is remaining the same at 1.75%. FHA charges that up front
mortgage insurance premium on all FHA loans regardless
of how much you put down and currently it's 1.75%
of your base loan amount.

Delaware FHA Loans

So, let me you an example, let's say you're buying a house
for 100,000 for easy math, and you want to finance the maximum. So, you're allowed to borrow 96.5% so you have to put down
3.5% which is 3500 bucks. So, you're gonna borrow $96,000. They're gonna charge you 1.75% of that which is $1,688 but they're gonna let you
finance that into the loan so your total loan amount would be 98,188. That's not changing,
that's gonna stay the same. Now, how much did we actually save? Well, let me show you
with a great example. Let's say you're purchasing
a home today for $200,000. You're gonna put the minimum down at 3.5% which is seven grand. Let's say your interest rate is 4.5% on a 30 year fixed. Your current payment
for principle interest in mortgage insurance would be $1,130.72.

That's with the current
annual MI of 0.85%. So, on January 27th, your
payment will actually drop to $1,090.80. That's a savings of $39,93 a month. I'm sorry, $39.93 a month. Which, on an annual basis is about $480 and over the life of the
loan for the full 30 years that $14,371. Now, if you compare that to
a purchase price of 300,000 putting 3.5% down, you'll
say $59.87 a month. So, there's some significant savings there and that's gonna help offset
some of the rising rates. Your payment may be
closer to being the same with the lower rate, with the higher rate now and the lower MI. But, if you're getting a
VAFA, USDA or conventional you won't see any benefit because this is only for FHA loans. Now, if you wanna take advantage of this, or you have any questions, you
wanna apply for an FHA loan, give me a call in the office 302-703-0727 or you can apply online at

Look forward to seeing you
guys on the next loan update. (slow rock music).

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