Seasoned buyers, first-time buyers and refinancers will all be eligible toward the end of January to benefit from President Obama’s Thursday announcement that the FHA is going to chop 0.5 percentage point from its monthly mortgage insurance premium that is charged for using FHA financing.
The annual mortgage insurance premium will drop to 0.85% from its current 1.35%. For example, if your loan amount is $200,000, you will save $83 per month under the new premiums. If you are in a high-cost area using the maximum loan amount of $625,500 such as Washington, D.C., and areas of California and New York, you will save a whopping $260 per month — more than $3,100 a year.
The upfront mortgage insurance premium remains intact at 1.75% added to your base loan amount.
If you are currently under contract with FHA financing in process, or if you are in the process of refinancing your FHA loan in which an FHA case number has been issued, you are not eligible.
According to HUD, you would have to have your FHA purchase or refinance case number canceled and then have a new case number issued when this new, reduced monthly mortgage insurance premium charge actually starts.
Assuming the program starts toward the end of January, this gets very tricky if you are under contract to purchase and your closing date is before the end of February because most lenders need at least a month to process a mortgage application.
If this is you, ask your real estate agent, the builder or the private party seller if they would consider a delay to your closing because reduced mortgage insurance means a big savings for you.
If you are in the middle of refinancing, you may have an urgent issue that requires you to close now and not delay. Otherwise, contact your loan officer immediately and ask to delay the closing in order for you to benefit from the lower mortgage insurance premium when the new program kicks in.
Whether you are actively purchasing or refinancing, you may be risking interest rate changes for better or worse if your rate lock expires, but you are guaranteed to gain a half-point mortgage insurance reduction. Ask what the lenders’ policy is in respect to rate lock extensions (and rate float downs in the event mortgage rates continue to improve). Waiting may be a risk worth taking.
If your interested in lowering your rates please feel free to reach out to The RNR Group directly now