ATTOM: FHA Buyers Could Save $450 Annually with MIP Cut

ATTOM Data Solutions, Irvine, Calif., released an analysis asserting that Federal Housing Administration borrowers could potentially save an average of $446 a year under the new mortgage insurance premium reduction set to take effect later this month.

ATTOM based its analysis on a 2016 median sales price of $185,000 nationwide for homes sold to buyers using an FHA loan. A monthly house payment–including property insurance and property taxes–at the current annual FHA insurance premium of 85 basis points would be $1,205. With the proposed FHA insurance premium of cut of 25 basis points (bringing the annual insurance premium down to 60 basis points), the monthly payment on the same median-priced home would be $1,168, a difference of more than $37 a month and $446 a year. Over five years the average savings would add up to $2,232, and over 10 years the average savings would add up to $4,463.

The analysis said among 444 counties with a population of at least 100,000 and sufficient home price data for sales using FHA loans, those with the biggest potential annual savings resulting from the premium reduction would be Santa Clara County (San Jose), Calif. ($1,448); Honolulu County, Hawaii ($1,399); Maui County, Hawaii ($1,276); Alameda County, Calif. ($1,267); and Santa Cruz County, Calif. ($1,253). Thirteen counties would see an average annual savings of $1,000 or more.

Smallest potential annual savings resulting from the premium reduction would be Bay County, Mich. ($193); Saginaw County, Mich. ($205); Trumbull County (Youngstown), Ohio ($213); Rock Island County, Ill. ($238); and Peoria County, Ill. ($241).

“The last FHA premium cut two years ago helped to trigger a relatively short-term jump in home sales to FHA buyers, who are typically first time homebuyers without much saved up for a down payment,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Prices of homes backed by FHA loans also accelerated higher in the wake of that last premium cut, although that premium cut occurred concurrently with a drop in mortgage rates, a scenario that is less likely this time around.”

ATTOM said home sales with FHA-backed loans rose to a more than six-year high of 168,992 in Q3 2015 following a previous cut to the FHA insurance premium in January 2015. Following that 50 basis point reduction, the share of home sales using FHA loans increased for three consecutive quarters, from 12.5 percent in Q4 2014 to 16.7 percent in Q3 2015. Since Q3 2015, the share of FHA home sales has basically flat-lined between 15 and 16 percent.