Homeowners thinking of using FHA for financing their next home will be happy to learn the mortgage insurance premium will be decreased by .25% starting on January 27, 2017.

The Federal Housing Administration (FHA) said this reduction will allow more "responsible borrowers" to purchase a home. On average the savings will be $500/annually for borrowers.  

FHA Mortgage payments consist of interest, principal and MIP.  Mortgage Insurance Premiums are used to insure the lender against the borrower's default.  FHA allows borrowers to finance a home with as little as 3.5% down payments.  Since the borrower doesn't have a lot of "skin in the game" the lender off-balances that with mortgage insurance.

While lowering the MIP payment is a good thing, interest rates are rising so the effect might not stimulate many new buyers as the savings will be a wash.

As with any financing, the best advice I can give is to work with a good lender, one who is consultative and will provide you with options to fit your situation.