In an announcement that was made on January 9th, the FHA took another aggressive step by introducing the 2022 FHA Mortgage Insurance Reduction of 0.25%. This will bring the FHA Mortgage Insurance Premium from 0.85% to 0.60% and it also reflects the second such decrease in as many years. This is a sign that foreclosures on homes is still decreasing and there is ample reserves in FHA premiums that can cover foreclosures when they do occur. Prior to the 2022 FHA Mortgage Insurance Reduction and the 2016 reduction, the FHA Mortgage Insurance Premium was 1.35%. With the reduction from 0.85% to 0.60% you would see the following savings in insurance premium: On a $200,000 loan, the FHA MIP would be reduced from $1,700 to $1,200 for a savings of $500 or a little over $40 per month. This is a significant amount of money you can save if you are currently in an FHA Loan. If I got ahead of myself here, the FHA MIP is seen as an up-front 1.75% of the loan value at closing PLUS the additional 0.60% calculated on an annual basis and paid monthly in your mortgage payment.
The 2022 FHA Mortgage Insurance Reduction is nothing but more good news for borrowers with FHA Loans, especially if they had purchased 2 years or longer ago when they were seeing Mortgage Insurance Premium rates at 1.35%. Now, if history is going to repeat itself, there is sure to be a significant increase in FHA Refinances just as this was witnessed with the last FHA MIP reduction last year. Now, there are many observations that can be seen from the recent events which are as follows:
– With the 2022 FHA Mortgage Insurance Reduction this was obviously in an effort by the current administration to create a spike in home sales after the surge in interest rates had definitely cooled down the housing market drastically in the 2 months after the Presidential Election.
– The one caveat with these rate reductions is they aren’t permanent and can be easily retracted by the President-Elect who can raise the FHA MIP immediately.
– Under normal circumstances the Republican party is normally against FHA Mortgage Insurance Premium reductions as they view the public is at risk should there be another meltdown and the FHA runs out of money for foreclosures and defaults.
– Upon release of the plan for the 2022 FHA Mortgage Insurance Reduction, private mortgage insurance companies that are publicly traded saw their values drop up to 5%.
As mentioned previously, FHA or the Federal Housing Administration is not a mortgage lender, but a government agency that is overseen by HUD (United States Department of Housing and Urban Development). It is up to private lenders to originate and fund FHA Loans while FHA’s role is as follows:
– Insure FHA Loans originated by HUD approved lenders
– Create the guidelines that FHA Loans are enforced with
– Up-front Mortgage Insurance Premium of 1.75%
– 0.60% Annual Mortgage Insurance Premium paid monthly
The one thing you can do now to take advantage of the 2022 FHA Mortgage Insurance Reduction is get in contact with us to refinance your current FHA Loan immediately. As long as your net tangible benefit of the refinance is 5%, you can apply for a refinance today. If you would like to get an FHA Loan for a home purchase or refinance an existing loan, please reach out immediately at 888-900-1020 or email@example.com. We are here to help and get you the best loan possible.