FHA Reduces Mortgage Insurance for Streamline Refinances

Mortgage and Lending with George Mason Mortgage, LLC.

The FHA has been jerking our chains with mortgage insurance (MI) premiums since the program was initiated in the late 1970’s.  This year has been no different as we saw the upfront and annual premiums rise drastically in April.   Not to mention the spike in October of 2010 that saw the monthly premiums rise from 0.55 to 1.10%. 

The reason for the latest change is on December 23, 2011; President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011.  Basically to keep the minor tax cut for payrolls across the country we penalized anybody deciding to take advantage of the low interest rates and fair qualifying standards of FHA Home Loans by making them pay for it in their MI premiums.  But, I’ll save that for a different blog post!

One groundbreaking piece to the legislation is the decrease to upfront and annual mortgage insurance for most FHA Streamline transactions that were endorsed before May 31, 2009.  The change is drastic as upfront MI is down to 0.01% and annual MI drops to 0.55%.  What this basically means is that thousands of homeowners now have the opportunity to refinance into these historically low rates and see the full benefit of savings. 

FHA Streamlines get a boost

The FHA Streamline is a great product that allows a homeowner to refinance with minimal hassle, as many lenders don’t require an appraisal and other credit qualifying documentation.  The problem is homeowners that purchased prior to October 2010 had an annual MI premium at .55%. Currently that rate is 1.25%.  It doesn’t take a mathematician to figure out that when mortgage insurance more than doubles per month the savings for dropping your rate from 5% to 3.75% is nullified.      

This new and improved FHA Streamline combined with Fannie Mae’s DU Refi Plus, Freddie Mac’s Open Access, and the VA Streamline (IRRL) provide a large percentage of homeowners affected by the housing crisis a little relief. 

(If you have questions about any of the products above just shoot me an email or a call at anytime.  mrogers@gmmllc.com  / 703.802.5303)

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