FHA Mortgage insurance cost will be decreasing at the end of January 2015. This is welcome news for Orlando residents in a time where it seems taxes and fees only go up. FHA was hit hard during the housing crisis and had to raised monthly mortgage insurance premiums (MIP) a few times to keep up. Now the housing crisis is over and home prices have stabilized in Orlando, FHA is operating in the black and can REDUCE the monthly mortgage insurance costs.
Just a little background – FHA like other government loan programs ( USDA, VA) have a one time upfront mortgage insurance premium that is typically rolled into the borrower loan. This UFMIP for FHA loans is currently set at 1.75%. So on a $100,000 loan, the borrower will have $1,750 added to their loan amount for a final adjusted loan amount of $101,750. USDA calls this a “guarantee fee” VA Mortgage calls this a “funding fee” It’s all essentially the same thing, a fee that reduces the loan’s cost to taxpayers and is required to be paid by the borrower on all government loan programs.
In addition to the one time mortgage insurance premium that is rolled into the loan, FHA home loans also require a monthly insurance fee. This is the fee that is going to reduced at the end of the month. The current monthly mortgage insurance ( PMI) rate is 1.35% – and this will be decreasing to .85%
This is a big deal and will clearly reduce cost for new first time home buyers entering the Orlando housing market in 2015. In addition, existing home owners that have received their FHA loan over the past few years at the higher 1.35% MI rate can look to refinancing. In some cases a refinance will make sense just for the fact of the reduced mortgage insurance. Below we have included an example:
$215,000 loan amount at the current 1.35% monthly rate = $241.88
$215,000 loan amount at the NEW .85% monthly rate = $152.29
In the example above the borrower saves $90.00 each month just with the reduced FHA mortgage insurance costs. In addition, mortgage interest rates are currently near all time low levels again. This means many of these existing FHA borrowers that do refinance could also receive reduced interest rate, thus increasing their monthly savings even more. It could be a lot more!
So if you are new home buyer in Orlando looking to purchase a home soon with a FHA mortgage – congrats, your costs are being reduced in 2015. If you are an existing homeowner that received a FHA loan over the past three years, please contact us so we can review the changes and see if a FHA refinance and reduced monthly mortgage insurance makes sense for you. Please reach out to us today by visiting www.fhamortgagesource.com or call ph: 800-743-7556
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FHA Mortgage Insurance Cost Decreasing