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Tuesday, January 10, 2017

FHA Reduces Premium

By Eric Steitz (Guest Poster)

Housing and Urban Development Secretary (and former Mayor of San Antonio) Julian Castro announced Jan. 9 that FHA was reducing their monthly mortgage insurance premium (MIP) by 25 basis points. This policy change is effective for any FHA loan closed on or after January 27, 2017 and is a welcomed money-saving change for home buyers.

So what exactly is a 25 basis-point reduction and how does it affect potential buyers? The current monthly MIP on FHA loans is 85 basis points (or .85%). Starting January 27, the monthly MIP drops to 60 basis points (or .60%).

In terms of monthly payments, the savings adds up. Using a scenario of a 4.5% interest rate and $150,000 base loan amount, the payment breaks down below:

Principal and Interest........... Previously $773.33 *** Reduced to $773.33
Monthly MIP....................... Previously $105.47 *** Reduced to $74.45
Total Payment (excl Tx/Ins).... Previously $878.80 *** Reduced to $847.78

While the savings is just $30 per month, that adds up over the course of the 30-year loan term. After one year, the savings is $360. After 30 years, it boosts up to $10,800!

For buyers, it’s a small change every month that can make a big difference over time. Please consider this scenario does not include property taxes and homeowner’s insurance, which increase the monthly mortgage payment. Also note that the interest rate shown is an estimate and does not necessarily reflect current rate pricing. Please contact me for an accurate rate quote and to see how you can become a home owner in 2017.

Eric Steitz, Mortgage Consultant (210) 910-5260
NMLS 920858 | TX-920858 | CO-100503394 http://apply.onqfinancial.com/texas/san-antonio/eric-steitz/