After repeated increases in the FHA Annual Mortgage Insurance Premium (MIP) in the past few years, it seems the FHA backup fund has reached its fill.
On January 9th, an announcement was made and the new FHA annual mortgage insurance premium rates were released. The decrease is a significant half a point. For purchase loans with the minimum 3.5% down payment, the FHA Annual Mortgage Insurance Premium goes from 1.35% of the loan amount to 0.85%.
For example, on an average loan amount of $200,000, you would have paid $2,700 a year in annual mortgage insurance – $225/month.
Under the new premiums, you only pay $1,700 per year – $141/month.
That’s an extra $84 a month (or $1020 a year) in your pocket!
No changes have been made to 15 year loans, or for FHA loans endorsed on or before May 2009, which benefit from special streamline refinance MIP rates.
Here is the how the new FHA Annual Mortgage Insurance Premium (MIP) will look like for case numbers assigned on or after January 26, 2015:
*To calculate your loan to value, divide your loan amount by the lesser of the home’s appraisal value or purchase price
If you have a loan in process and are already assigned an FHA case number, you can still take advantage of the new FHA annual mortgage insurance premiums. FHA number cancellations will be accepted this month, and your lender can guide you through the process.
The cherry on top of this FHA cake?
Here’s something few borrowers knew: regardless of the closing date on your loan, you used to have to pay the full month of interest to the old lender.
So if your loan was funded at the beginning of the month, you still had to pay daily interest to the new lender, as well as that month’s interest to the old lender – even if you didn’t owe that last one a single dime! Don’t ask me who came up with that bright idea, but lenders didn’t mind, and most borrowers generally didn’t notice.
Thanks to a regulatory mandate from the Consumer Financial Protection Bureau, FHA has agreed to end its controversial full-month interest policy… but only starting January 21st. Oh well, a win is a win.
If you’re still stuck in a higher interest FHA loan (anything over 3.5% as of today, January 16, 2015), this is the time to refinance.