The Federal Housing Administration (FHA) has made good on its promise to lower mortgage premiums for any borrowers who were interested in refinancing their loans. Earlier this month, the Federal Housing Administration (FHA) lowered its mortgage premiums for homeowners who are interested in refinancing their loans.
President Barack Obama first introduced the initiative earlier this year, stating “I’m not one of those people who thinks we should just sit by and wait for the housing market go hit bottom. There are real things we can do right now.”
So what are some of the ‘real things’ that President Obama is speaking of? Anyone with a loan before June 1st, 2009 can now see premiums move from 1% to 0.01% if they choose to refinance, and they’ll see annual fees reduced from 1.15% to 0.55%. All other homeowners, however, will have to purchase a home or refinance at 1.75% UFMIP and about 1.5% MIP annually.
The difference in costs between Up Front Mortgage Insurance Premium (UFMIP) loans and Federal Housing Authority (FHA) loans that are refinanced are huge. The FHA estimates that the average borrower can see savings of $1000 in premiums and over $3000 a year in additional savings, averaging $100 to $400 a month in mortgage payments.
This is a big deal, particularly as many homeowners who have FHA loans have homes that have either lost value or are upside down. Apart from homeowners now being able to save a lot of money, another benefit is that the FHA streamline refinancing option doesn’t require for an appraisal to be done. This means that the current value of your home isn’t going to get in the way of your ability to qualify for a new lower mortgage rate and monthly payment. Also, even if you may have defaulted on paying other bills, this may not necessarily impede your chances of qualifying for the refinancing loan, especially if you have made your mortgage payments on time for the last 12 months.
Though the reduced fees for the streamlined refinancing will cost the FHA “hundreds of millions of dollars”, Shaun Donovan, the Secretary for Housing and Urban Development says that it’s a “relatively small amount.”
“We think that on net this can have close to no impact on the fund,” Donovan says.
This has left many Americans scrambling to see if they can qualify for a refinancing of their current mortgage.
Wondering if you qualify? Here are the qualifications you need to know:
- You must have an FHA-insured mortgage
- A minimum of 6 payments must have been previously made towards your FHA-insured loan in order to qualify for a refinance
- There should be a 5% or more reduction on the mortgage’s principal and interest payments OR
- An adjustable rate mortgage (ARM) has to be refinanced to a fixed rate mortgage
This change may prove to be vital to homeowners all over the country. Any news on reduced insurance premiums is always welcome, and such changes may help make it possible for more people to have a home that welcomes them.