Effective January 26, 2015
FHA recently announced a reduction of 50 basis points (0.50%) on all new 30-year loans, making homeownership more affordable. This is the first time we’ve seen a reduction in MIP (mortgage insurance premium) since 2001.
FHA is not a mortgage lender; it’s a mortgage insurer. Just like most insurers, the FHA collects payments known as premiums to fund the claims it pays to lenders.
FHA mortgage insurance premiums are split into two categories:
- Upfront Mortgage Insurance Premium (UFMIP). UFMIP is paid up front at closing, equal to 1.35% of the loan. A $100,000 loan would have $1,350 of UFMIP paid at closing. Most people will simply add their UFMIP to their mortgaged amount to reduce the overall closing cost.
- Mortgage Insurance Premium (MIP). This second type of insurance is annual. Annual MIP rates will vary based on you’re loan amount, initial loan’s LTV and length of loan.
The complete MIP schedule for FHA loans of $625,00 or less, are as follow:
- 15-year loan terms with loan-to-value over 90%: 0.70 percent annual MIP
- 15-year loan terms with loan-to-value under 90%: 0.45 percent annual MIP
- 30-year loan terms with loan-to-value over 95%: 0.85 percent annual MIP
- 30-year loan terms with loan-to-value under 95%: 0.80 percent annual MIP
To add more beauty to this, rates are at their lowest levels in close to two years. It’s an amazing time to buy or refinance. If we can be of any assistance, please contact us.