HUD has cut the mortgage insurance rates for FHA loans. With 3.5% down, the current annual rate is 1.35%. As of January 26, 2015, that rate will go to .85%. What a great savings of .5% for home buyers! On the average $175,000 purchase, that is a savings of $71.60 PER MONTH! This bold move will make it possible for home buyers to qualify for a larger loan.
What happens if you already have a loan in process at the higher mortgage insurance rate? It's even better news. FHA will allow lenders to cancel case numbers which were issued on or after December 27, 2014 on non-closed loans and get new case numbers allowing the lower mortgage insurance rate. With FHA, everything is based on the date of the case number assignment. Sadly, if the case number was issued prior to December 27, you won't be able to cancel it and get the lower MIP. Loans with the cancelled and then new case numbers and lower MIP, must close AFTER January 26, 2015.
FHA is hoping that this change will bring 250,000 more buyers to the market. It will certainly make FHA loans more attractive. Since HUD raised the MIP rate, we have seen more purchasers choosing other options such as conventional and Rural Development financing. The FHA loan is a great option for many buyers though because of their more relaxed guidelines.
For more information, check out the HUD press release regarding this change. My underwriters are in-house, so we can get questions answered quickly and get your loan closed fast. Give me a call to see if you can benefit from these much lower FHA mortgage insurance rates!