FHA to Decrease Refinance Fees

FHA (Federal Housing Administration) will lower the mortgage insurance premiums and annual fees for borrowers who refinance their loans as part of President Obama's plan to improve the housing market.

Borrowers who refinance their existing FHA loans will pay an upfront insurance premium equal to 0.01%, the lowest allowable rate, of the mortgage amount. For example, $100 for a $100,000 loan - plus an annual fee of 0.55% (down from 1.15%).  This is effective June 11, 2012.

Qualifying borrowers must be current on an existing FHA-insured mortgage signed on or before May 31, 2009.  An estimated of 2 to 3 million borrowers will benefit from this new program.  The program doesn't require verification of income and employment, and it doesn't mandate a new appraisal of the property.  A typical borrower would save about $1,000 a year in premiums and $3,000 a year including savings from lower rates, the FHA said.

The new plan is in contrast with the new increase in upfront fee and annual fee for the new borrowers.  A borrower making a 3.5% down payment on a home purchase as of April 1 will pay a 1.75% upfront fee and a 1.25% annual fee. 

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