February 7, 2025

To say things in Washington D.C. are being shaken up these days would be an understatement. Every time you turn on the news there’s something new happening, and the department of Housing and Urban Development (HUD) is no different. Facing rising home prices and tighter budgets, many Americans are struggling to afford homeownership. Alleviating the country’s housing challenges and improving affordability looks to be at the top of the list for the Trump Administration.

Arguably most of the heavy lifting for improving housing supply falls on state and local governments, but the Mortgage Bankers Association (MBA) believes it has a way to improve housing affordability and availability. The MBA is working with the new HUD Secretary, Scott Turner, to push for a “reasonable reduction” in mortgage insurance premiums on Federal Housing Administration (FHA) loans.

What is FHA mortgage insurance? It’s a type of insurance required for loans backed by the FHA that protect the lender against losses if a borrower defaults on their mortgage. There’s both a one-time upfront fee (UFMIP) either paid by the borrower at closing or financed over the life of the loan, and ongoing monthly mortgage insurance payments (MMI) for the duration of the loan term. Currently the FHA UFMIP is 1.75% of the loan amount, which on a $500,000 purchase price is roughly $8300. The MMI varies based on the loan amount, term of the loan, and loan-to-value (LTV), but it adds about $221 to the monthly mortgage payment on that $500,000 home.
Significant money.

What could this mean for homebuyers? By HUD reducing these premiums it would directly lower borrowers’ monthly payments, reducing the financial burden on homebuyers, particularly first-time homebuyers, and could open the door to homeownership for more people and also provide a much needed boost to the housing market.

Stay tuned, and let’s hope for some upcoming reductions!