How Much Do You Save with Lower FHA Annual Mortgage Insurance Premiums?
Making home ownerships more accessible and sustainable is a major goal of the Federal Housing Administration (FHA). To support with this goal the FHA has lowered annual mortgage insurance by 0.5% down to 0.8%. This could look like if you gathered a $175,000 home loan with less than 5% down then the reduction will end up saving you $818 per year or $3,932 over five years. This is huge news for potential homeowners who were on the edge of going for their dream home.
What’s An Annual Mortgage?
FHA annual mortgage premiums are paid in 12 monthly installments every year, and are paid on top of principal, interest and insurance. For new FHA loans, they last for the entire life of the loan, regardless of whether you have more than 20 percent equity in your home.
How Much Do You Save?
The announced changes will take the annual MIP from 1.35 percent to 0.85 percent for loans with less than 5 percent down, and from 1.30 percent to 0.8 percent for loans with more than 5 percent down.
Savings by the year on a 30 year mortgage at $175k
What Does This Mean?
This means that now first time home buyers have the chance to take their first steps in owning a home. It doesn’t mean that it’s going to be a walk in the park but now it might make the leap more bearable for lower income families. This is also great news for the real estate economy since more homes sold equals money.