In one of his first official acts following his inauguration on January 20th, President Donald Trump signed an executive order suspending the cut in the annual FHA mortgage insurance premium (MIP) announced by the Department of Housing and Urban Development (HUD) on January 9th, 2017.

The reduction in FHA mortgage insurance was the last major housing policy initiative announced by HUD under the Obama administration.  Although the announced FHA mortgage insurance cuts were well received by borrowers and community housing advocates, some questioned the timing of the policy announcement.  Many industry observers had speculated that Trump would reverse the cuts when he took office so his action did not come as a total surprise.  The timing might have caught some people off guard; however, as few expected Trump to act on this issue within hours of being sworn in as President .

The lower annual FHA MIP rates were supposed to apply to all FHA mortgages that closed on or after January 27, 2017.  Given the timing of President Trump’s executive order, no borrowers were able to benefit from the reduced FHA insurance rates.

The announced cuts reduced the ongoing FHA mortgage insurance premium by almost half for some borrowers.  For mortgages with terms longer than 15 years, the new FHA MIP was supposed to range from .55% to .60% of the loan amount but returns to existing rates of .80% to 1.05% of the loan amount, depending on loan length, loan amount and loan-to-value (LTV) ratio.  For mortgages with terms of 15 years or shorter, the new FHA MIP was supposed to range from .25% to .50% of the loan amount but returns to existing rates of .45% to .95% of the loan amount.

• FREEandCLEAR provides a thorough explanation of the FHA Home Loan Program including the current up-front and annual FHA MIP rates.  You can also use our FHA Mortgage Qualification Calculator to calculate what size FHA loan you can afford as well as your up-front and annual FHA mortgage insurance fees

If implemented, the FHA insurance cuts could have saved borrowers hundreds of dollars a month and thousands of dollars a year.  For example, for a $200,000 30 year fixed rate loan with a loan-to-value (LTV) ratio of 96.5%, the annual FHA mortgage insurance premium based on the new rate (.60% of the loan amount) would have been $1,200 or $100 per month as compared to $1,700, or $142 per month, under the current FHA mortgage insurance rate (.85% of the loan amount).

The annual FHA MIP reduction for certain loans under the FHA Streamline and Simple Refinance programs was also reversed.

The suspension of the FHA insurance cuts was positioned as a way to allow newly appointed HUD secretary Dr. Ben Carson to make his own decision on this policy matter so it is possible that we could see more changes to the FHA Mortgage Program and MIP fees in the future. 

 
As always, FREEandCLEAR keeps you apprised of any housing policy changes and offers free tools and resources to evaluate how HUD decisions affect borrowers.

HUD announced that it is lowering the annual mortgage insurance premium (MIP) on FHA loans that close on or after January 27, 2017.  Lowering the annual FHA MIP reduces the ongoing monthly cost for borrowers with FHA mortgages and makes the FHA program more competitive with other low down payment mortgage options such as the HomeReady Mortgage Program.

The new FHA MIP rates represent a significant reduction relative to the prior rates, enabling borrowers to reduce their total monthly housing expense which makes owning a home more affordable.  

The annual FHA MIP rate depends on loan term, mortgage amount and loan-to-value (LTV) ratio with the new FHA MIP ranging from .55% to .60% of the loan amount for mortgages with terms longer than 15 years.  This compares to prior FHA MIP rates of .80% to 1.05% of the loan amount for for mortgages with terms longer than 15 years.

For example, for a $250,000 30 year fixed rate loan with a loan-to-value (LTV) ratio of 96.5%, the annual FHA MIP based on the new rate (.60% of the loan amount) is $1,500 or $125 per month.  This compares to $2,125, or $177 per month, under the previous FHA MIP rate (.85% of the loan amount).

For mortgages with terms of 15 years or less, the new annual FHA MIP ranges from .25% to .50% of the loan amount as compared to the prior FHA MIP rate of .45% to .95% of the loan amount.

• FREEandCLEAR provides a comprehensive overview of the FHA Mortgage Program including the updated FHA Mortgage Insurance Premium rates.  You can also use our FHA Mortgage Qualification Calculator to determine the upfront and annual FHA MIP fees for any loan based on the new MIP rates.

The annual FHA MIP is also reduced for certain loans under the FHA Streamline and Simple Refinance programs.

Although the upfront FHA MIP fee remains unchanged at 1.75% of the loan amount for most mortgages, the reduction in the ongoing annual MIP is a significant boost for prospective home buyers who lack the funds to make a significant down payment.  Combined with the increase in FHA loan limits for 2017, the lower annual FHA MIP should make home ownership more attainable for more people.

The timing of the HUD announcement created a stir as this is likely the last major housing policy announcement before the new administration takes over.  It will be interesting to see if HUD secretary nominee Dr. Ben Carson accepts the new rates or implements his own changes to the FHA Mortgage Program and MIP fees.  

FREEandCLEAR will keep you abreast of any developments and provide the tools and resources to understand how FHA policy changes impact mortgage borrowers.

2017 brings higher loan limits across the board for conforming, FHA and VA mortgages.  This is the first year since 2006 that the standard loan limits increased for these mortgage programs.  The higher loan limits reflect a recovering housing market and modest home price appreciation over the past several years.  After eight long years, the housing market appears to have finally dug itself out of its deep hole.

The higher loan limits should expand the number of borrowers who can access conforming, FHA and VA mortgages which is beneficial as home prices continue their gradual rise across the country.  

FREEandCLEAR offers a number of resources that enable you to check updated 2017 loan limits including Conforming, FHA and VA Loan Limit Calculators.  Below, we summarize the loan limit changes for each of these mortgage programs and highlight the FREEandCLEAR tools you can use to determine the 2017 loan limit for your county.

2017 Conforming Loan Limits

In the contiguous United States and Puerto Rico, the general conforming loan limit for a single unit property increases from $417,000 to $424,100 in 2017.  The 2017 conforming loan limit for a single unit property in a high cost area increases to $636,150.  The conforming loan limit for a four unit unit property ranges from a standard limit of $815,000 to $1,223,475 in high cost areas.

In Alaska, Hawaii, Guam and the U.S. Virgin Islands, the general 2017 conforming loan limit for a single unit property is $636,150 while the loan limit in high cost areas is $954,225.  The 2017 conforming loan limit for a four unit unit property ranges from a standard limit of $1,223,475 to $1,835,200 in high cost areas.

FREEandCLEAR Resources

• Conforming Loan Limit Calculator
• The Difference Between Conforming and Non-Conforming Mortgages

2017 FHA Loan Limits

In the contiguous United States and Puerto Rico, the basic standard FHA loan limit for a single unit property increases from $271,050 to $275,665 in 2017.  The 2017 FHA loan limit for a single unit property in a high cost area increases to $636,150.  The FHA loan limit for a four unit unit property ranges from a basic standard limit of $530,150 to $1,223,475 in high cost areas.

In Alaska, Hawaii, Guam and the U.S. Virgin Islands, the general 2017 FHA loan limits range from $636,150 for a single unit property to $1,835,200 for a four unit property.

FREEandCLEAR Resources

• FHA Loan Limit Calculator
• FHA Mortgage Qualification Calculator
• FHA Mortgage Program Overview

2017 VA Loan Limits

In the contiguous United States and Puerto Rico, the 2017 basic standard VA loan limit is $424,100 and the high cost area VA loan limit is $636,150.  In Alaska, Hawaii, Guam and the U.S. Virgin Islands, the 2017 VA loan limits range from a basic standard limit of $636,150 to $954,225 in high cost areas.

FREEandCLEAR Resources

• VA Loan Limit Calculator
• VA Mortgage Qualification Calculator
• VA Mortgage Program Overview

As always, all the resources on FREEandCLEAR are free to use.  We encourage you to use our tools to understand how the 2017 loan limits apply to you and share your feedback.  We always welcome input on how to improve FREEandCLEAR for our users.