Refinance your FHA mortgage to cancel your FHA MIP forever
FHA mortgage rates are dropping
A drop in FHA mortgage insurance premiums — plus a reduction in FHA mortgage rates — has scores of FHA-backed homeowners “in the money” for an FHA Streamline Refinance.
If your current loan is backed by the FHA and your current mortgage rate is higher than 4.5%, it may be time to explore your refinance options.
Current mortgage rates are cheap, and FHA MIP is less expensive than it’s been in years.
Homeowners using the FHA Streamline Refinance are saving considerable amounts each month.Verify your FHA MIP removal eligibility (Jan 26th, 2020)
About FHA mortgage rates
The Federal Housing Administration (FHA) is a mortgage insurer, born in the Great Depression. It’s been in existence for more than 80 years and, today, the agency is the largest insurer of mortgage loans worldwide.
The role of the FHA is a simple one: reduce mortgage lending risk for U.S. banks. The manner in which the FHA fulfills this role is also simple.
The FHA maintains a rulebook known as the “FHA guidelines” which lists every imaginable characteristic of a mortgage loan along with the agency’s tolerance for such a trait.
If a loan meets the FHA’s tolerance limits, it will insure the lender against loss on the loan.
As an example of an FHA guideline, agency rules state that a home buyer must make a downpayment of at least 3.5% on a home, save for loans for which the buyer is purchasing a new construction condo.
Downpayment requirements in certain non-FHA approved condos can be as high as ten percent.
The guidelines also prescribe a maximum loan size for every U.S. county.
FHA loan limits range from $331,760 to $765,600, depending on the region’s typical home cost. Throughout much of Alabama, Mississippi, and Louisiana, for example, the FHA loan limit for a detached, single-family home is closer to $331,760.
In California, FHA loan limits are often closer to $765,600 — especially near metropolitan areas such as Los Angeles and San Francisco.
Because the FHA insures lenders against loss, recently, FHA mortgage rates have been lower than rates for non-insured, comparable conventional loans.
Many FHA mortgage lenders now quote rates in the high 3s, with few or no accompanying closing costs. It’s an excellent time to explore your FHA options.Verify your FHA MIP removal eligibility (Jan 26th, 2020)
Refinance using the FHA streamline refinance
For homeowners with an existing FHA mortgage, today’s mortgage rates are an excellent opportunity to make use of the FHA’s special refinance program, the FHA Streamline Refinance.
The FHA Streamline Refinance is among the simplest refinance programs available today.
According to the FHA guidelines, the FHA Streamline Refinance requires:
- No home appraisal
- No income verification
The FHA Streamline Refinance only requires that the homeowner has made on-time payments for the last 6 months; and, that the homeowner receives a “Net Tangible Benefit” – in this case, defined as lowering the “combined rate” by at least one-half of one percent.
For instance, the homeowner opened an FHA loan in May 2013 with a rate of 4.00%. The mortgage insurance premium is equal to 1.35% per year. The combined rate is 5.35%.
The homeowner receives a rate quote at 4% with MIP of 0.60%. Note that FHA mortgage insurance was reduced in January 2017. The new combined rate would be 4.60%, or three-quarters of one percent lower than the existing one.
The FHA refinance is eligible.
With mortgage rates low, it’s easier for homeowners to meet the FHA’s Net Tangible Benefit requirement. If your mortgage is more than six months old, you may find yourself eligible.Verify your FHA MIP removal eligibility (Jan 26th, 2020)
Switch from FHA to conventional
As a homeowner whose home values has climbed, you may also be eligible to drop your FHA mortgage insurance premiums (MIP) altogether via a refinance into a conventional loan.
With home values rising nationwide, many FHA-backed homeowners now have sufficient equity to leave the FHA and refinance into a loan with Fannie Mae or Freddie Mac.
Mortgage rates are slightly higher with conventional loans, but the mortgage insurance premiums are typically much less.
Furthermore, unlike with the FHA, the mortgage insurance paid on a loan via Fannie Mae and Freddie Mac is non-permanent.
By law, your conventional lender is required to cancel your home’s mortgage insurance coverage once your home’s loan-to-value reaches 78%. For some homeowners, that could happen before the end of this decade.
FHA homeowners should explore their refinance options today.
Get today’s FHA mortgage rates
Today’s FHA mortgage rates are cheap. Home buyers are getting more house for their dollar and there are refinance opportunities for millions of existing FHA-backed homeowners.Get FHA rate quotes. Start here. (Jan 26th, 2020)
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