Refinancing within 1 year of getting FHA loan to drop the PMI

Hi, I just bought a place and due to credit score issues and some debt had to go with FHA (I put near 50% down!!!). I am hoping (and reasonably expecting) that my credit score and ‘bad’ debt will be reasonable enough within a year of my original purchase date.   So, if I bought the place, via FHA January 1st, 2012, can I refinance and get a conventional loan AND DROP THE PMI charges before Jan 1st 2013? If not, what is the mandatory limit on time?   I just dont want to have to pay a PMI when I get to a better financial place.

chanel

in Insurance 13 years and 1 month ago

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lawrenceken | 10 years and 9 months ago

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Most first time home buyers said that conventional will generally be a cheaper option (but not always). My brother-in-law has a conventional loan with 5% down and they are paying PMI. Approximately, their PMI is about half the amount they would have paid with a FHA loan (did not have to pay any up-front PMI). He said that the payment was $120 per month on a $250k loan and closing costs were only $3400\. I guess the FHA closing costs were somewhere around $6000\. I’m still puzzled about the PMI, that’s why I want to work with a loan officer expert. I’ve seen several loan officers here http://www.zillow.com/profile/ProspectMortgage/Reviews/, but can’t decide whom to consult with. Any recommendation, mates?

Hunt4MiddleClass | 13 years and 1 month ago

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MOPAR, FHA REQUIRES MMI regardless of how much you put down.  The OP’s credit is probably really bad, so they couldn’t qualify for a traditional mortgage.  Traditionally, the point of an FHA loan is to assist buyers who don’t have the cash for a down payment, but given how tight the credit markets are these days, many borrowers who have the 20%+ down are finding themselves “stuck” with FHA underwriting.

callalily | 13 years and 1 month ago

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OP, people with an FHA loan can refinance with a “streamline” loan, meaning no appraisal is required. But this in itself would not affect PMI, and after April 6, the cost of PMI for FHA increases. AFAIK, the requirement for PMI is not related to whether you have a conventional or FHA loan — you need PMI if you put down less than 20 percent. I think for a while there only FHA was offering loans for less than 10 or 20 percent down (if the loan met the guidelines).

callalily | 13 years and 1 month ago

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We have PMI and an FHA loan. Since the OP put down 50 percent, why is OP required to pay mortgage insurance?

Hunt4MiddleClass | 13 years and 1 month ago

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FHA loans don’t have PMI, you’re referring to something similar called MMI (Mortgage Mutual Insurance).  MMI terminated when both of the following coniditons have been met: (1) 5 years of loan repayment history and (2) the outstanding loan balance reaches 78% of the sales price or appraised value, whichever is lower.  Your FHA payments may also include all or some of the UFMIP (Upfront Mortgage Insurance Premium).  If you wrapped this into your loan, you can’t get rid of it (i.e. will be paying some portion of it for the life of the loan).  You came to the table with a lot of cash down, but your credit must be pretty rough.  I’m not sure that 12 months will be long enough for you to qulify for a traditional mortgage, but it’s worth speaking to your lender about.  In the interim, pay down all your credit cards, and keep that debt to income ratio in the Golden Zone!