If you purchased a home, or even refinance your home, over the past couple of years you may have noticed a substantial portion of your mortgage payment going towards mortgage insurance. Mortgage Insurance Premiums through the FHA reached a high point of 1.35 percent of the loan amount.
On a $200,000 loan amount, a home buyer would pay $2,700 in mortgage insurance per year, or $225 a month.
The recent reduction in the FHA Mortgage Insurance Premium was cut from the 1.35 percent all the way down to 0.85 percent. This 50 basis point reduction brought the Mortgage Insurance Premium to its lowest level since October of 2010.
Now, on the same $200,000, a home buyer would pay $1,700 a year in mortgage insurance, or $141 a month.
This reduction in mortgage insurance not only has the potential to save current home owners $1,000 or more a year, it also gives home buyers the ability to purchase more of a home. This increase in purchasing power should help some higher price homes receive more offers and move faster as the spring buying market quickly approaches.
In addition to the FHA Mortgage Insurance reduction, current mortgage rates remain near historic lows. Home buyers who purchased their home a few years back and received an interest rate above 4 percent may now qualify for a lower rate and save even more money on top of the Mortgage Insurance reduction. To top it off, the FHA allows current FHA home owners to refinance under their streamline guidelines which do not require any income verification or an appraisal.
You can check out an estimate of how much you might save by reducing your Mortgage Insurance and qualifying for a lower mortgage rate here.
By: Jeremy Redlinger (NMLS #627335)
Guardian Financial Inc. (NMLS #357121)