The MIP is the fee charged to the borrower to compensate for the low down payment. FHA requires only 3.5% down. Because there is little equity in the property, insurance is required to protect the lender in case of default.
This new fee decrease affects the 30-year fixed rate loan (as well as the 25-year and 20-year term). The 15-year loan, which has a lower premium already, remains unchanged.
FHA 30-year Fixed Rate MIP Reduction
Loans less than $625,000, 3.5% down: MIP reduced from 1.35% to 0.80%.
Loans less than $625,000, 5% down: MIP reduced from 1.30% to 0.85%.
Loans at or above $625,000, 3.5% down: MIP reduced from 1.5% to 1.0%.
Loans at or above $625,000, 5% down: MIP reduced from 1.55% to 1.05%.