Anthony MaroneSenior Loan Officer NMLS#: 1190158
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Sorry home buyers. FHA mortgage insurance premiums in New Jersey won’t be reduced anytime soon. That recent announcement came from officials with the Federal Housing Administration. So the mortgage insurance premiums that are currently in place will be carried over to 2019, unchanged.
FHA Mortgage Insurance Premiums in 2019
Home buyers in New Jersey who make a relatively small down payment typically have to pay for mortgage insurance. These policies are usually required when the borrower’s loan-to-value (LTV) ratio rises above 80%.
There has been some industry “chatter” over the past few months that the Department of Housing and Urban Development (HUD) might lower the FHA mortgage insurance premium that’s required on most FHA loans. That would’ve been a money-saver for home buyers using an FHA loan to buy a house in New Jersey.
And there’s a precedent for this kind of thing. FHA insurance premiums have been reduced in the past, most recently during President Obama’s time in office. The Obama-era reductions were scheduled to begin toward the end of January 2017. But they were later reversed by President Trump, shortly after he took office on January 20.
The National Association of REALTORS® and other groups have asked HUD to reduce FHA mortgage insurance premiums once more, as they have in the past. But that has yet to happen. In fact, we now have confirmation that such a move isn’t even being considered right now.
During a November 2018 phone call with reporters, FHA Commissioner Brian Montgomery said:
“We do have to be realistic about the fact that that is still a relatively thin margin. While the MMI Fund is sound at this point in time, I think we’re still far away from being in a position to consider any reduction in our mortgage insurance premiums.”
The end result of all this is that FHA mortgage insurance premiums for New Jersey home buyers will stay the same in 2019. So what are those premiums? How much do borrowers have to pay? Here’s what you need to know.
How Much Borrowers Have to Pay
Federal Housing Administration (FHA) loans are a popular financing option among New Jersey home buyers. First-time buyers, in particular, like this program because it offers a low down payment and flexible qualification criteria.
The downside is that borrowers who use an FHA loan in New Jersey typically have to pay for mortgage insurance. There are two of these premiums:
- Upfront — The upfront insurance premium equals 1.75% of the base loan amount. But despite the name, it can usually be rolled into the monthly payments and paid over time.
- Annual — There’s also an annual premium for FHA loans. It can vary based on the details of the loan, but for most borrowers it comes to 0.85% of the amount borrowed.
It’s also worth noting that the annual insurance premium for FHA loans usually remains in place for the life of the loan. In contrast, the private mortgage insurance (PMI) applied to some conventional loans can be removed later on, once the homeowner reaches a certain equity level.
Explore your options: You have a lot of financing options when it comes to buying a home in New Jersey. We can help you choose the best one for your particular situation. Please contact us with your mortgage-related questions.