On February 7th, the Biden-Harris administration announced a reduction in the annual mortgage insurance premiums charged to homebuyers who obtain an FHA-insured mortgage. The reduction was announced by Vice President Kamala Harris and HUD Secretary Marcia L. Fudge, and is expected to make homeownership more affordable and accessible for working families.
The reduction of the annual mortgage insurance premiums (annual MIP) charged to homebuyers who obtain an FHA-insured mortgage will be 30 basis points, from 0.85% to 0.55%. This could mean an estimated savings of $678 million for American families in aggregate by the end of 2023 alone, with the reduction benefiting an estimated 850,000 borrowers over the coming year, saving these families an average of $800 annually.
This action supports the Biden-Harris Administration’s goals of making homeownership more accessible and affordable for the nation’s working families, particularly households of color, for whom FHA-insured mortgages have been a cornerstone for access to homeownership. The administration has taken a range of steps to make homeownership a reality for more Americans, including expanding access to housing counseling, enabling more borrowers making payments on student loans to qualify for an FHA-insured mortgage, and changing FHA’s underwriting policies to allow lenders to use positive rental history in evaluating applicants’ creditworthiness.
The annual mortgage insurance premium reductions will apply to almost all Single Family Title II forward mortgages insured by FHA, including single family homes, condominiums, and manufactured homes, all eligible loan-to-value ratios, and all eligible base loan amounts. The reduction will also help more people qualify for a mortgage and will be effective for mortgages endorsed for insurance by FHA on or after March 20, 2023.
This reduction in FHA annual mortgage insurance premiums is expected to provide overall savings to borrowers and will allow more households to access the stability and wealth creation of homeownership. It is an excellent step towards helping working families to achieve their dream of owning a home, particularly for families of color who have been underrepresented in homeownership due to historic disparities.