The FHAâ€™s new mortgage insurance premium rates went into effect in mid-June, the second change this year and the fifth in four years. As the FHA works to balance the viability of the insurance program and the projected losses on bad loans, they are making it clear that not all FHA-insured loans are created equal. And that is a good thing â€“ for some homeowners.
The FHA changed the MIP schedule on April 9 and again on June 11, creating tiered rates for existing FHA mortgage holders and home buyers looking to secure an FHA mortgage. With the new schedule, first-time buyers or recent loan-holders are now subject to higher monthly premiums (both upfront and annual) to take advantage of low FHA interest rates.
However, the new schedule rewards existing mortgage-holders by offering significantly lower rates and reduced fees in an effort to get stable homeowners spending more money in the economy. In recent years, existing mortgage-holders may have found it difficult to qualify for the FHA Streamline Refinance due to steadily rising insurance premiums. Streamline Refinancing requires a 5 percent reduction in total mortgage payment for refinancing, a hurdle that many homeowners found difficult to clear.
With the new rates, the FHA has significantly lowered the bar for refinancing to homeowners who have held an FHA mortgage for more than 3 years. This is great news, with USA Today reporting that mortgage rates are continuing to drop to record lows.
What do these changes mean to you?