President Obama is announcing a proposed reduction in FHA Mortgage Insurance today. Currently, most FHA Loans (with 3.5% down) have Annual Mortgage Insurance Premiums of 1.35%. The Obama Administration wants to reduce annual MI premiums by 50 basis points down to 0.85%.
FHA (Federal Housing Administration) and Congress still have to buy off on the plan, and the timing of when the change will take place is uncertain. Current FHA borrowers, with higher MI, will have to refinance into a new FHA loan to garner the new (lower) MI premium.
B/c FHA interest rates are lower than conventional rates, the MI reduction makes FHA much more competitive relative to conventional loans for high LTV (loan to value) financing.
FHA’s Up Front Premium of 1.75% will remain the same.
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