Lower VA Funding Fee and FHA MIP (Mortgage Insurance Premium)
If you’ve been waiting to buy a home, recent changes in the industry may help make your monthly payments a bit easier. Homebuyers will benefit from two major changes impacting the industry: the first, a lower VA Funding Fee, and the second, a reduction in the monthly FHA Mortgage Insurance Premium (MIP). These changes will significantly impact the ability and willingness of buyers to apply for a loan in 2023 and beyond.
At Queensborough National Bank & Trust, we take pride in offering competitive mortgages to local customers in the communities we serve. We are excited about these changes to the home loans market—they will help first-time homebuyers and those looking to purchase a new home.
In this blog post, we cover the details of these changes and how they could impact your mortgage and home buying capability.
A Look at the Basics: What Is a Mortgage Insurance Premium?
MIP applies to loans insured by the Federal Housing Administration (FHA). When you receive an FHA loan, you pay the MIP, calculated as a percentage of the sales price. MIP is paid in two parts: an upfront fee, which is typically rolled into the loan amount, and an annual fee, which is paid in monthly installments.
How Will the Changes Lower MIP on FHA Mortgages?
The Department of Housing and Urban Development (HUD) has lowered the FHA MIP insurance by 30 basis points (0.30%). This reduces the premium to 0.55% of the sales price, a pretty significant reduction from the current rate of 0.85%. The MIP depends on the loan size, down payment, and loan term. Because MIP is calculated based on the loan balance, the monthly MIP payment will decrease as the loan is repaid. The new rate will apply to most FHA-insured mortgages, saving Americans an estimated $678 million in 2023, according to HUD Secretary Marcia L. Fudge. Approximately 850,000 borrowers will benefit from the change over this year alone, with the average home buyer saving $800 per year! (The average FHA borrower purchasing a one-unit single family home with a $265,000 mortgage.)
The action aims to make homeownership more affordable for working families. It will particularly help underrepresented homebuyers and those struggling to find accessible mortgage rates.
HUD has taken numerous steps to make homeownership more affordable. For example, it changed FHA underwriting policies to incorporate positive rental history when evaluating creditworthiness for FHA-insured mortgages.
With an national median home price of $467,700 (as of data available from the 4th quarter of 2022), the new MIP rate will save the average buyer over $1,400 per year. This amounts to $600 million in savings for American homeowners. At Queensborough, we want our customers to be among the homeowners who will take advantage of these changes!
Let us help your family benefit from lower rates on your FHA Mortgage Insurance Premium. Talk to one of our experienced loan officers to find out how you can realize your dream to own your home.
A Quick Overview: What Is the VA Funding Fee?
Active and retired military service personnel can benefit from loans backed by the Department of Veterans Affairs (VA). If you qualify for a VA loan, you'll pay a one-time funding fee when you sign up. There are many benefits of choosing a loan backed by the VA, making it responsible if you default on your mortgage.
The VA published new rates that take effect on April 7, 2023. Most of these rates represent savings for veterans who wish to buy a home. Keep in mind that those with a VA disability rating don't have to pay a VA loan funding fee at all. If you have questions about the funding fee and how the change will impact your mortgage application, speak with a knowledgeable Queensborough loan officer at your local branch.
How Will a Reduced Fee Make Homeownership More Affordable for Veterans?
The lower VA funding fee affects loans closing between April 7, 2023 and November 14, 2031. For example, if you wish to build a new home, the VA funding fees for purchase on construction loans will decrease as follows:
For the first use:
- For a down payment of less than 5%, the VA funding fee is now 2.15%.
- For a down payment of 5% or more, you'll pay 1.5%.
- With a 10% or greater down payment, the fee goes down to 1.25%.
For subsequent use:
- Expect to pay a funding fee of 3.3% with a down payment of less than 5%.
- The new rates for down payments of 5%, 10%, or more are the same for first use and subsequent usage.
For a VA cashout refinance loan, the funding fee for first use is 2.15% under the new structure, with a subsequent use funding fee of 3.3%.
The VA funding fee for other loan types varies, as follows:
- Interest Rate Reduction Refinance Loan: 0.5%
- Manufactured Home Loans: 1%
- Native American Direct Loan: 1.25%
- Loan Assumptions: 0.5%
Are you a veteran? Apply for a VA loan at your local Queensborough branch and find out how this change can help you save.
How Can You Take Advantage of These Changes?
At Queensborough National Bank & Trust, we have many home mortgage loan options to choose from. It all starts with an initial meeting and pre-qualification process to help you set a homebuying budget. Your loan officer will be by your side every step of the way. That includes answering questions and determining your eligibility for the FHA MIP reductions and VA Funding Fee decrease, both promising to save homebuyers hundreds of dollars or more in 2023 through 2031.
Queensborough has been named a Best of Georgia Winner and has served local communities just like yours for over 120 years. To learn more ways to make a home mortgage affordable, make an appointment with a loan officer today. You can also contact us online for answers to your questions regarding these exciting changes.