FHA Insurance Question
I’m getting mixed messages on how long one must continue to pay FHA mortgage “PMI”. I know that the property has to reach 78% LTV, but does it have to be after a minumim of 5 years of paying it? If, after one or two years, your equity reaches 78% (22%), after an appraisal is…
I’m getting mixed messages on how long one must continue to pay FHA mortgage “PMI”. I know that the property has to reach 78% LTV, but does it have to be after a minumim of 5 years of paying it? If, after one or two years, your equity reaches 78% (22%), after an appraisal is one eligible to stop paying the FHA-MI? thanks!
Blackie and Adan are both right ONLY if you’re talking about a 30 year loan. If you do a 15 year loan below 78% LTV (maybe it’s 80%, I can’t remember right now), then you pay no mortgage insurance premium (MIP).
Glad to have that confirmed by Adam. He’s definitely the expert on these things. My knowledge is just coming from trying to hop on the FHA bandwagon a few months ago, and ultimately deciding against.
blackie beat me to it. FHA MI is different that your traditional PMI.
You can put 50% down and you will still have MI on a FHA loan.
In order to get rid of the mortgage insurance (MI) that accompanies FHA loans, you have to meet BOTH the 22% equity and 5-year thresholds. You MUST pay the MI for 5 years before you can remove it from an FHA loan. The only way to get out without paying 5 years of MI is to refinance into a non-FHA loan, though that’s probably going to be a less attractive option as interest rates rise.
This is obviously different from regular PMI, where you can extinguish it simply by reaching a 20% equity threshold.
I just closed in Nov 09 with an FHA loan. My PMI is until my principal paid reaches 20% (80% or less of purchase price remains) which happens to be calculated to 5 years. I was told that if I happened to come into some money and I paid upfront say $50K then my PMI contribution would then be zero.
It was a couple years ago but I remember that we did not need to pay after about a year. Plus we received a check for our PMI premimum.