Obama's MIP Reduction for 2017 Reversed by Incoming Trump Administration
FHA Homeowners Can Still Save an Average of $900 Annually From the 2015 Reduction. Further Estimated Reduction of $500 Suspended.
On January 9, 2017, the Federal Housing Administration operating under the Obama administration announced a further reduction in the FHA loan annual mortgage insurance premiums (MIP) for new loans. The change would affect most Title II FHA mortgage loans with a closing/disbursement date on or after January 27, 2017. Excluded were loans made for properties in the Hawaiian Homelands.
These new MIP rates would have reduced the annual premiums by a quarter of one percentage point, bringing them in line with what rates were prior to pre-housing crisis levels of 2008. This is referred to by many as the "collapse of the housing market." Homebuyers financing their homes with an FHA government-backed loan could have saved an additional $500 per year based on an average $200,000 mortgage with a term of at least 11 years.
Less than two weeks later in the first hour of Trump's presidency, the incoming administration suspended the rate reduction with its first executive action. The suspension of the 0.25 percentage point premium rate cut happened before the reduction had even taken effect.
Since FHA loans have a minimum down payment rate set as low as 3.5 percent, it is compulsory that borrowers pay the MIP. When someone purchases a home with an FHA mortgage, part of their mortgage payment includes a required annual mortgage insurance premium (MIP). The amount of the annual MIP is based on the loan-to-value ratio, base loan amount, and the term of the mortgage.
Loans backed by FHA are popular because the FICO score requirement of 580 is lower than what is required for conventional mortgages and the down payment can be as low as 3.5%. Buyers must still demonstrate their ability to qualify for a mortgage and pay it back on time.
See also: Current Mortgage Insurance Premium (MIP) Rates.
FHA Loan Articles and Mortgage News
July 1, 2017 - FHA regulations and underwriting requirements are subject to change from time to time. Some of the changes come as part of new laws that close legal loopholes, improve the fairness of the FHA mortgage loan process, or modernize the FHA loan program.
May 12, 2017 - The FHA Handbook instructs lenders that a borrower is technically qualified for maximum financing at the required minimum 3.5% down payment when the applicant has a FICO score at 580 or higher.
April 7, 2017 - FICO score issues are a common source of stress to potential FHA borrowers. Everyone wants to know if their FICO scores are high enough to qualify for an FHA mortgage. Is it possible to qualify for an FHA loan or refinance loan with credit scores from 500 to 579? Or are higher scores required?
March 22, 2017 - Borrowers wishing to purchase a home with an FHA loan may need some help with the down payment. There are rules that permit a borrower to receive such outside help, but the source and purpose of these funds are carefully regulated under FHA mortgage loan rules.
March 15, 2017 - Credit issues worry some FHA loan applicants. Not knowing how the lender will interpret some kinds of negative credit information causes a lot of anxiety for new borrowers. However, having a collection account on your record may not be an automatic barrier to getting an FHA mortgage.
