Have you considered buying a new home with an FHA loan recently? If so, we have some great news for you. FHA has announced that rates for its required mortgage insurance are about to drop pretty significantly.

FHA loans come with many benefits. Chief among them is the ability to put as little as 3.5% down at the time of purchase. The downside is that lower down payments mean borrowers must pay a mortgage insurance premium (or MIP). This insurance is just a way for banks to protect themselves against a borrower’s default. Well, FHA borrowers rejoice! The cost of this mortgage insurance is about to drop pretty significantly.

According to the government agency, the rate will drop from 1.35% to 0.85% on January 26th of this year. Let’s take a look at what that means for real dollars saved. The current median home price in Fort Collins is about $270,000. If you were buying a home at this price with an FHA loan you’d be looking at savings of around $1,350 when the new rates take effect. That’s not exactly chump change. In fact, the National Association of REALTORS estimates that this savings will encourage a quarter million new borrowers to buy their first home.

While this is definitely good news for FHA borrowers, it doesn’t represent a change in of FHA qualifications. In other words, while the drop in insurance rates will help those who are qualified for an FHA loan keep more of their money in their pockets, it doesn’t represent a shift in FHA requirements for obtaining a loan in the first place.

Still the rate reduction is undoubtedly a positive move for potential homebuyers. The new rate means that more new borrowers will be able to enter the market and purchase a home. In another encouraging sign, the FHA also announced that it will be taking further steps over the next few months to, “cut red tape and clarify lending standards”. For our part, any move to make homeownership more affordable and more accessible is a good one. Especially if it helps make first-time home buying more affordable.