FHA mortgage loans just got cheaper

Minneapolis, MN: The Federal Housing Administration (FHA) just announced a 30 basis point reduction to the Annual Mortgage Insurance Premiums (annual MIP) it charges borrowers for FHA-insured Single Family mortgages.

They further said this reduction supports the Biden-Harris Administration’s goals of making homeownership more accessible and affordable for the nation’s homebuyers. FHA mortgage insurance facilitates broader availability of mortgage financing to those not adequately served by the conventional mortgage market, particularly households of color for whom FHA-insured mortgages have been a cornerstone of access to affordable homeownership.

What Does This Mean To Home Buyers?

Simply put, cheaper monthly payments when using an FHA loan.

Most home mortgage loans with down payments of less than 20% require an additional cost for the higher risk of the small down payment.  This is commonly known as  PMI (private mortgage insurance), or just MI (mortgage insurance.)

The cost of the mortgage insurance varies based on many factors, including what type of loan you are getting (Standard, FHA, USDA, etc).

For an FHA loan, the monthly mortgage insurance was a factor of .85% when you had just a small down payment.  Going forward, it has BEEN REDUCED to just .55%.

In real dollars, on a sample $250,000 FHA loan, the old monthly mortgage insurance would have cost $176.25 a month. Under the new lowered monthly mortgage insurance, that would be just $114.04.  A savings of $62.21 a month, and $746.52 per year!

FHA loans are great loans, and have helped millions of people become home owners over the years. But is an FHA loan right for you?

Many factors go into determining which home mortgage loan type is right for you and your family. The only way to really know is to complete a full loan application with your local mortgage broker, who will review all your information to determine the best loan.

Generally speaking, FHA loans only need a small down payment of 3.50%, making them very popular for this reason. They also have easier underwriting guidelines and credit score requirements compared to other loans, making them super popular for first time home buyers, although the FHA home loan is not just for first time home buyers.  Anyone can use one!

Conventional loans can start with just 3% down, and can potentially have even cheaper mortgage insurance, or even no mortgage insurance if you put at least 20% down.

BEST PART?

FHA LOANS HAVE BETTER INTEREST RATES than many other loans, many times making payments LOWER than conventional loans with down payments of less than 20%.

Be sure to ask your Loan Officer compare a conventional vs FHA loan, as many won't automatically. Worst yet, some lenders don't even offer FHA loans.

FHA Loan Negatives

While FHA loans are great loans, there are a few negative items. First, FHA loans are more picky about the condition of home. Peeling paint is an issues on homes older than 1978, and the homes roof being in rough condition are common items that need to be address.

Second, the mortgage insurance is for the 'life of the loan' if you put down a small down payment, while conventional loans, the mortgage insurance can go away eventually.  If you use an FHA loan and put down more than the minimum, FHA mortgage insurance can not go away until after 132 months, or with a loan refinance.

Bad Perception By Real Estate Agents

Sadly, way too many real estate agents have a completely undeserved negative feeling toward home buyers using an FHA loan to buy a home. This can cause them to advise a seller not to accept your FHA loan offer to purchase the home.

The common misconception is that they believe FHA loans are only bad credit people, and that the loan many never close.  FHA loan pre-approvals that ultimately do not close, is no greater than other loans.

They also believe that FHA work orders, which for example, may require the seller to fix any peeling paint on older homes is too burdensome and problematic.  While a home in complete disrepair is not a good candidate for FHA financing, the bulk of homes easily pass without any issue.

FHA loans fell out of favor by real estate agents in 2020 - 2022 as home sellers could commonly choose from 20 offers.  But this has changed dramatically in 2023. FHA loans should never automatically be dismissed.

Get Approved Today

Be it an FHA loan, or any other home loan product, the expert licensed Loan Officers at Cambria Mortgage, the Joe Metzler team, will be happy to review your application, then discuss with you all your options to find out the right loan for you and your family.

Never any obligation of cost to apply, so get started today. We lend for FHA loans, and most other home loans in Minnesota, Iowa, North Dakota, South Dakota, and Wisconsin.