For those who are not already aware, FHA loans carry an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP). These additional insurance payments are used to protect lenders against loan defaults. The UFMIP is a one-time charge paid at closing while the annual mortgage insurance premium is paid each month. It is calculated on an annual basis and then you pay a monthly amount. While the UFMIP will remain the same for all loans at 1.75%, the U.S. Department of Housing and Urban Development recently announced that MIP will be reduced by 30 basis points or 0.30% across the board for new FHA loans.
The new MIP will range from as low as 0.15% with a maximum of 0.80% whereas it previously ranged from 0.45% to 1.05%. A borrower’s exact MIP is determined by the loan term length, the size of the loan, and the down payment. While this percentage decrease might sound small on the surface the impact is actually quite large given the size of the average mortgage loan.
For example, a $500,000 home purchase with $50,000 or 10% down would save $1,350 annually or over $100 per month. In addition to saving money for new homebuyers, this will make qualifying for a mortgage slightly more manageable in the higher-rate environment we currently find ourselves. Below is a full breakdown of the new changes.
| Annual Mortgage Insurance Premium (MIP) | |||||||
| Mortgage Term of More Than 15 Years | |||||||
| Base Loan Amount | LTV | New MIP (bps) | Previous MIP (bps) | Duration | |||
| Less than or equal to $726,200 | ≤ 90.00% | 50 | 80 | 11 years | |||
| > 90.00% but ≤ 95.00% | 50 | 80 | Full term | ||||
| > 95.00% | 55 | 85 | Full term | ||||
| Greater than $726,200 | ≤ 90.00% | 70 | 100 | 11 years | |||
| > 90.00% but ≤ 95.00% | 70 | 100 | Full term | ||||
| > 95.00% | 75 | 105 | Full term | ||||
| Mortgage Term of Less than or Equal to 15 Years | |||||||
| Base Loan Amount | LTV | New MIP (bps) | Previous MIP (bps) | Duration | |||
| Less than or equal to $726,200 | ≤ 90.00% | 15 | 45 | 11 years | |||
| > 90.00% | 40 | 70 | Full term | ||||
| Greater than $726,200 | ≤ 78.00% | 15 | 45 | 11 years | |||
| > 78.00% but ≤ 90.00% | 40 | 70 | 11 years | ||||
| > 90.00% | 65 | 95 | Full term | ||||
If you have questions about qualifying for a home loan or how these new FHA Mortgage Insurance Premium changes can help you, give us a call. At Bluefire Mortgage Group, we are here to answer any questions you may have about home financing. Feel free to contact us at (760)930-0569 and one of our loan advisors will be happy to assist you.
