How Can The Lower Cost of FHA Mortgage Insurance Benefit You?

The cost of buying a home or refinancing a home with FHA financing in San Diego County just became more affordable!

President Obama has announced that there will be a reduction in FHA (Federal Housing Administration) insurance premiums.

This announcement is great news for both prospective new home buyers and existing home owners who are looking to refinance their current home.

How Will Reduced Insurance Premiums Affect San Diego Home Owners?

The previous annual insurance rate for a mortgage was 1.35 %. To help stimulate the housing market which is still rebounding, the Obama administration has announced that it is lowering FHA mortgage insurance rates down by 50 basis points to 0.85%.

The move is expected to have an impact on more than two million home owners throughout the U.S. including many in the San Diego County area.

FHA was one of the only programs to offer a low down payment option requiring a minimum down payment of only 3.5%. However, recently both Freddie Mac and Fannie Mae also announced a new 3 % down payment option which will necessitate private mortgage insurance and is especially designed for those with a good credit score and who are first time buyers.

Both moves are perfectly timed to foster growth in the San Diego area with the onset of the spring housing market here in California.

Why Has the FHA Lowered Mortgage Insurance Premium Rates?

When the housing bubble initially burst the overall volume of the Federal Housing Administration had rocketed as it was able to make up for the lack of available credit in the private market. However, there was a price to pay for this initial success because the Federal Housing Administration was forced to double the annual insurance premium they charged.

This shrunk the number of buyers who were using FHA loans and made it so that many prospective buyers could not afford the increased cost.

Even though the FHA is still currently operating under the mandatory 2 % minimum reserve, it has been steadily increasing its reserves to a point it is now able to lower its rates.

The timing is perfect as both the economy and the housing market has finally begun to see the light of day, the FHA is now about to stimulate the housing market even further with a reduced MIP.

By lowering the mortgage insurance premium, along with other moves made by the Obama administration, qualified home buyers and those looking to refinance their homes now have an opportunity to save some money on their mortgage insurance.

How Lower FHA Insurance Premiums Will Impact San Diego Home Owners

San Diego home owners should also know that the FHA conforming loan limit in San Diego County was raised from its previous 2014 rate of $546,250 and was increased to $562,350 for 2015.

The average approved FHA applicant can now expect an average saving of around $80.00 per month on their monthly payment. VA loans are not impacted by this insurance rate change.

Who is affected by this new rate change?

Those who have been issued FHA Case Numbers on or after January 26, 2015 will be eligible for the new premium rate. Additionally, the FHA will also allow lenders to cancel Case Numbers issued within 30 days prior to the effective date of the rate change announcement.

Borrowers should also note that upfront mortgage insurance premiums and the life-of-loan MIP structure will remain unchanged by this rate reduction.

Restrictions Which Apply

There are some exceptions which apply to these reduced insurance premiums as they will not apply to all situations including:

  • Those who want mortgage terms of 15 years or less
  • Borrowers who have already CLOSED an FHA loan will not be immediately eligible and will have to wait for the mandatory 210 day period. Additionally, they have to have made six payments on their existing FHA loan before refinancing through a streamline loan before being eligible for the lower mortgage insurance premium
  • The reductions DO NOT apply to streamline refinancing of existing FHA loans that were endorsed on or before May 31, 2009

Contact Shanne Sleder To learn More About New FHA MIP Reductions

Whether you are buying your first home or looking to refinance your existing home, you always want to speak with an experienced mortgage broker to find the best deal because every situation is different. We can help explain all your options.

As an experienced San Diego Mortgage Broker, I have access to all the above loan options and can explain how the FHA mortgage insurance premium rate reductions will impact you.

I can help you with traditional conforming, high balance conforming, VA loans, and jumbo loans. Rates are still incredibly affordable and there are may options available to get you pre-approved.

Please call me at 619-312-0612 with any questions you have as we can get your mortgage application process right now!



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