The Federal Housing Administration announced today that it would reduce the mortgage insurance premiums it charges homebuyers for its mortgage insurance.
This is great for people buying their first home who may now be eligible for relief from lower mortgage insurance premiums required on FHA-insured loans.
This reduction is expected to save homebuyers, on average, up to $800 per year. The price reduction will take effect on March 20, 2023.
HUD, through the FHA, will reduce its annual mortgage insurance premiums from 0.85% to 0.55% for most new borrowers. The mortgage insurance premium is the monthly fee homeowners with FHA-insured mortgages pay to insure their mortgages. The fee is paid in addition to the monthly principal and interest payments.
Mortgage insurance is required to protect against losses resulting from defaults on home mortgages. FHA requires both upfront and annual mortgage insurance for all borrowers regardless of the down payment.
According to the Mortgage Bankers Association President and CEO Bob Broeksmit, “The lower premiums will expand homeownership opportunities by lowering mortgage payments for qualified FHA borrowers, providing critical relief from the steep rise in mortgage rates and home prices just in time for the spring buying season. This will especially help minority homebuyers and low-and moderate-income households predominantly served by FHA loans.”
First-time homebuyers typically use FHA loans due to their smaller down payment requirements and more flexible underwriting guidelines. For credit-worthy borrowers, FHA-insured loans have long been a pathway to homeownership.