Biden Administration Announces New Mortgage Premium Reduction Program
The FHA estimates that any borrower purchasing a one-unit single family home with a $265,000 mortgage will save approximately $800 this year as a result of the new program, and the FHA also believes that a lower annual MIP can also help more Americans qualify for mortgages.
Through the U.S. Department of Housing and Urban Development and the Federal Housing Authority, the Joe Biden Administration has implemented a program aimed at reducing mortgage insurance premiums for American homeowners who have an FHA-insured mortgage.
According to HUD Secretary Marcia L. Fudge, this ‘30 basis point’ reduction will reduce mortgage premiums from 0.85 percent to 0.55 percent for most homebuyers seeking an FHA-insured mortgage, which could save $678 million for American families by the end of 2023.
“Today, we are building on the steps we’ve taken to make homeownership more affordable, and HUD is acting to ensure people feel comfortable purchasing a home as they build toward their future,” said HUD Secretary Marcia L. Fudge. “As we reduce housing costs for people with FHA mortgages, we continue our work to address long-standing disparities in homeownership.”
HUD made the announcement on Feb. 22. According to the FHA, an FHA annual mortgage insurance premium, which is calculated as a percentage of the outstanding loan balance, constitutes a portion of the costs considered in calculating a borrower’s debt-to-income ratio. This is a factor used in qualifying households for mortgage credit.
As stated by the FHA, the 30 basis point annual MIP reduction will apply to almost all Single Family Title II forward mortgages insured by FHA, and will apply to all eligible property types, including single family homes, condominiums, and manufactured homes, all eligible loan-to-value ratios, and all eligible base loan amounts. The FHA estimates that any borrower purchasing a one-unit single family home with a $265,000 mortgage will save approximately $800 this year as a result of the new program, and the FHA also believes that a lower annual MIP can also help more Americans qualify for mortgages.
The new MIP program is the latest in several Biden Administration initiatives that are geared toward making housing more affordable. In 2021, the Property Appraisal and Valuation Task Force was created by the Biden Administration with the goal of “rooting out” ethnic and class biases in home appraisals.
“For many families, the savings will make the difference in their ability to purchase the home of their choice,” said Assistant HUD Secretary Julia Gordon.
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