The U.S. Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), has announced a 30-basis-point reduction to the annual mortgage insurance premiums charged to home buyers who obtain an FHA-insured mortgage.
The adjusted premium, which is being reduced from 0.85% to 0.55% for most home buyers seeking an FHA-insured mortgage, could mean an estimated savings of $678 million for Americans in aggregate by the end of 2023 alone, according to the Biden administration.
“At a time when budgets are tight and homeownership is out of reach for too many, FHA’s premium reduction will allow more households to access the stability and wealth creation of homeownership, particularly the first-time homebuyers and families of color who rely heavily on affordable FHA-insured mortgages,” says Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “For many families, the savings will make the difference in their ability to purchase the home of their choice.”
The annual mortgage insurance premiums reduction will apply to almost all Single Family Title II forward mortgages insured by FHA. Further, the reduction applies to all eligible property types, including single-family homes, condominiums and manufactured homes, all eligible loan-to-value ratios, and all eligible base loan amounts.
“The lower premiums will expand homeownership opportunities by lowering mortgage payments for qualified FHA borrowers, providing critical relief from the steep rise in mortgage rates and home prices just in time for the spring buying season,” says MBA President and CEO Bob Broeksmit.
“Ensuring a robust FHA program that protects taxpayers and offers affordable homeownership opportunities for families in underserved communities is important, and we will work with the Biden administration and Congress on policies that have the greatest impact on borrower affordability and sustainability,” he adds.
The reductions will be effective for mortgages endorsed for insurance by FHA on or after March 20.