FHA TO LOWER MI PREMIUM FROM 1.35% to .85%.
This is a major change for buyers and sellers alike. Here's why......
First of all for example on a $250,000 sales price financed with a 30 year fixed FHA mortgage the monthly mortgage insurance premium would decrease about $100 a month.
So that will increase the buying power as well you might ask and you’d be correct.
Secondly the same buyers who maxed out at $250,000 sales price now can purchase up to $265,000 once these changes are enacted by FHA. That’s an extra $15,000 in sales price just by this one simple change.
It is not clear yet when the change will take effect, but the premium will drop 50 basis points because "Too many creditworthy families who can afford -- and want to purchase -- a home are shut out of homeownership opportunities due to today's tight lending market," (according to the White House).
Please also remember that FHA monthly mortgage insurance premium (MIP) still never drops off for the life of the loan unlike the private mortgage insurance (PMI) on conventional loans.
I will keep you up to date on the changes and how they affect you and your business. As always I am available if you or your clients have questions. I appreciate your referrals and look forward to hearing from you.