FHA Lowers MIP Rates

Some good news about FHA loans.  Earlier this year, the Federal Housing Finance Agency announced that it was lowering the annual rate for mortgage insurance premiums or MIP.  While the rate varies depending upon the loan amount and down payment, the rate for most borrowers dropped from 0.85% to 0.55%.  That’s a pretty sizable drop in what borrowers have to pay each month.  FHA was able to lower these rates because they’ve built up considerable reserves over the past few years as home prices have appreciated and the number of foreclosures has been very low.  The MIP is essentially a tax on all borrowers that is then used to offset the losses incurred by borrowers who default on their loans.  In addition to the annual MIP, there is an upfront MIP charge of 1.75% of the loan amount.  FHA loans are backed by the federal government and are designed for lower income buyers as they have lower qualification levels and offer a low down payment as low as 3.5%.

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