"Most new FHA mortgages" will see cut of 25 basis points in annual premiums
The Federal Housing Administration (FHA) considers many items when determining whether to cut premiums, including the outlook for the economy, the budget implications of a cut, and determining when is the right timing for a cut.
While the timing apparently wasn’t right in November, the timing is right now, as the FHA announced Monday that it is cutting its annual mortgage insurance premiums for the second time in two years.
The last cut was January 2015, when the Obama administration announced a 50 basis point cut in annual mortgage insurance premium prices, prompting a boost in no closing cost FHA Streamline refinances for current FHA mortgage holders.
According to the FHA, it will cut the annual mortgage insurance premiums most borrowers will pay by one-quarter of a percentage point, or 25 basis points.
The FHA said it projects the new premium rates will save new FHA-insured homeowners an average of $500 in 2017 alone.
According to the FHA, the cut applies to new mortgages with a closing or disbursement date on or after Jan. 27, 2017. For current FHA borrowers, they can start the Streamline refinance process immediately.
In a statement, HUD Secretary Julián Castro said that the cut aligns the FHA’s policies with “today’s risk environment” and “comes at the right time” for borrowers who now have to deal with a rising mortgage interest rate environment.
“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” Castro said. “This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.”
“We’ve carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers,” Golding said.
“Homeownership is the way most middle class Americans build wealth and achieve financial security for themselves and their families,” Golding added. “This conservative reduction in our premium rates is an appropriate measure to support them on their path to the American dream.”
The FHA said the premium cut “will significantly expand” access to mortgage credit and lower the cost of housing for the approximately 1 million households who are expected to purchase a home or refinance their mortgages using FHA-insured financing in 2017.
For more details on how a FHA home loan can benefit you, contact Alliance Home Loans, a HUD approved lender.