For those looking to purchase a home, the cost of the mortgage can be a major factor in their decision. One cost that is often overlooked is the mortgage insurance premium (MIP). This is an additional fee that is required for Federal Housing Administration (FHA) loans. The purpose of MIP is to protect the lender in case the borrower defaults on the loan. However, recent news has come out that the FHA premium has been reduced, bringing a break for borrowers.
What is the FHA Premium?
The FHA premium is a fee that is added to the monthly mortgage payment for FHA loans. The purpose of the fee is to protect the lender in case the borrower defaults on the loan. The FHA premium is a percentage of the loan amount and is based on the length of the loan. For example, a 30-year loan will have a higher premium than a 15-year loan.
According to UPI, the FHA premium has been reduced by 30 basis points, from 0.85% to 0.55%. This reduction is a significant savings for borrowers who are currently paying the higher premium. On a $200,000 loan, this reduction could result in a savings of approximately $800 per year! This reduction will make FHA loans more affordable for those who are looking to purchase a home.
Benefits of FHA Loans:
In addition to the recent reduction in premium, there are several other benefits to FHA loans. One of the biggest benefits is that they have a lower down payment requirement than conventional loans. This makes them a great option for those who are just starting out and may not have a large down payment saved. Another benefit is that FHA loans are more lenient when it comes to credit score requirements, making them a great option for those who may have a lower credit score.
All in all, the reduction in FHA premiums is great news for those who are looking to purchase a home. It will make FHA loans more affordable and accessible to a wider range of borrowers. If you are considering financing a home and are not sure what type of loan is right for you, it is always a good idea to speak with a local loan officer who can help you determine which loan is best for your individual situation. With the recent reduction in FHA premium, now may be the perfect time to take the leap into homeownership.
Want to book a free exploratory call? Click here.
Prefer to just go ahead and apply? Click here.