We were so happy to announce a few weeks ago that the FHA monthly PMI rates were going to drop later this month. However, an important change has taken place. Last Friday, the Trump Administration announced that FHA PMI rate reductions were cancelled.
A Freeze to All Pending Regulations
The White House issued a memo freezing all pending regulations from the Obama administration. This includes, among other things, the reduced FHA PMI rate reductions. The rate reduction, which was supposed to go into effect on January 27, 2017, would have reduced PMI rates by 0.25%. As we mentioned in our blog from a few weeks ago, this would have saved homeowners money every month. On a $400,000 loan, the savings would have been roughly $100/month. The savings would obviously have been much greater for higher loan amounts.
Impact of FHA PMI Rate Reductions Being Cancelled
If you were recently pre-approved, or had your FHA pre-approval details updated earlier this month, you should have your lender check your figures. The amount for which you are pre-approved is dependent on the monthly payment including principal, interest, taxes, and insurance. If your loan officer took into account a reduced PMI rate, then this must be corrected. Your pre-approved purchase price will likely be a little bit lower as a result.
What the Future Holds
The sudden cancellation of the PMI rate reductions was met with much criticism. However, it is too early to tell whether this new administration will end up dropping the rates later on, after review. For home buyers looking to purchase a home with an FHA, the silver lining is that should a rate reduction occur in the future, an FHA streamline refinance may be possible to take advantage of lower PMI rates.