FHA Loans

For all purchase and refinance FHA loans with a term greater than 15 years, approved borrowers will see a .5% MIP reduction. In plain terms, the reduction in MIP is similar to lowering your mortgage interest rate by half of a percent.

Current FHA loan holders may benefit by considering a streamline refinance to gain monthly and annual savings with the reduced MIP, while rates remain at an all time low. With a streamline refinance, borrowers are not required to appraise their home or verify income.

How You Can Save With a Streamline Refinance today

Below is an example of the savings that an average current FHA loan holder may expect to see with a streamline refinance and an MIP reduction.

Your Current FHA LoanStreamline Refinance After 1/26/15
Loan Amount$200,000$200,000
Interest Rate4.75%3.75%
MIP1.35%.85%
APR6.360%4.839%
Principal & Insurance$1061.55$942.44
Insurance$75$75
Taxes$250$250
MIP$223.42$140.67
Total Monthly Payment$1,609.97$1,407.92

Total Monthly Savings with Streamline Refinance: $202.05

5 Things to Know About the FHA Mortgage Insurance Reduction:

  • For all FHA loans the insurance premium will be reduced by 50 basis points (0.5%) on both purchase and refinance transactions.
  • Applies to all purchase or refinance FHA loans with terms greater than 15 years.
  • There is no change in premium for loans with a term of 15 years or less. The reduction affects all loan types with the exception of FHA streamline refinances made before May 31, 2009. There is no change to the 1.75% upfront mortgage insurance premium.
  • With a streamline refinance, there is no appraisal or income verification required.

As many of you are aware, on April 1st of this year, the FHA made changes to their monthly mortgage insurance by raising the premium by 10 basis points. For instance, if you were only putting 3.5% down on a FHA loan before April, your monthly payment MIP (Mortgage Insurance Payment) would have been 1.25% and now it would be 1.35%.

What some of you may not be aware of is that there is another change on the horizon for FHA. As of June 3rd, 2013 FHA will change how long you will be required to keep the monthly MIP on your mortgage. If you are making less than a 10% down payment, you will be required to carry MIP for the life of your loan. As you can see in the chart below, this change will affect all FHA mortgages.

TermLTV (%)PreviousNew
≤ 15yrs≤ 78No annual MIP11years
≤ 15yrs>78 – 90.00Cancelled at 78% LTV11years
≤ 15yrs>90.00Cancelled at 78% LTVLoan term
>15yrs≤ 785years11years
>15yrs>78 – 90.00Cancelled at 78% LTV &5yrs11years
>15yrs>90.00Cancelled at 78% LTV &5yrsLoan term

Don’t worry, you don’t have to close by June 3rd. However, you will need to have an FHA case number locked in by a loan officer before June 3rd, so give us a call and let’s get the process started for you!

Why Refinance With An FHA Streamline?

As you have probably heard, mortgage rates are at an all time low. But don’t head into your new refinance blindly. Know your options!

One of our favorite programs we offer to clients who currently have an FHA loan is the FHA Streamline Refinance. It’s a great program that can not only lower your interest rate but significantly lower your monthly payment.

  1. There are no closing costs
  2. You may not need to get an appraisal
  3. You’ll get new fixed rates which are currently at an all-time historical low
  4. You don’t need your income documents to get approved
  5. If you’re refinancing an FHA loan that was taken prior to May 31, 2009, you can get a reduction in your monthly mortgage insurance and you can waive the upfront mortgage insurance premium.