Study: $446 Annual Average Savings from New FHA Premium Deduction

The new Federal Housing Administration (FHA) mortgage insurance premium deduction could result in an average savings of $446 per year, according to a new analysis from ATTOM Data Solutions.

Working on the foundation of the $185,000 median sales price in 2016 and across a span of 444 counties with a population of at least 100,000, ATTOM Data Solutions estimated that 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, the annual insurance premium would drop to 60 basis points and 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. The average savings would add up to $2,232 over five years and $4,463 over 10 years.

Annual savings, of course, would fluctuate based on market affluence. The biggest potential annual savings resulting from the premium reduction would be in California’ Santa Clara County (San Jose) with $1,448 in annual savings, while homeowners in Bay County, Mich., would only pocket $193 in annual savings.

“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 at 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.”