How Much For FHA Mortgage Insurance?
July 3rd, 2008
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Suzanne writes and asks about FHA loans and mortgage insurance:
“I do have an question regarding my 15 year FHA refinance loan with mortgage. They not only charge me with $1,600 on PMI (mortgage Insurance) upfront, but they also charge me on monthly basis. The mortgage guy told me that they have to for townhome and condo, also after a year the monthly PMI will just fall off and I don’t have to worry about it. But when I call the lender and asked them about it, they said the mortgage insurance would continue until I reach a certain loan amount.
“Can anyone tell me is more about the PMI on the FHA PMI?”
Private mortgage insurance (MI — not PMI) is the private-sector equivalent of FHA insurance — in exchange for an insurance fee you get to buy a home with less down. This is okay with the lender because if you’re foreclosed the insurance protects the lender.
With FHA loans there’s an upfront “mortgage insurance premium” or MIP and an annualized MIP paid monthly.
As of July 14th HUD will go to risk-based pricing for FHA insurance, thus the up-front premium will range from 1.25 percent to 2.25 percent depending on the amount down and your credit status. The annual fee will range from .50 to .55 percent.
If you pay .50 percent each month on the basis of the remaining loan balance then to find your monthly payment for a $150,000 loan balance you would multiply $150,000 x .50 = $750. $750 divided by 12 = $62.50. The next month the loan balance will be a little smaller so the MIP cost will drop a touch.
For details, see HUD Mortgage Letter 8-16.
As to canceling, see HUD Mortgage Letter 00-38.
It says the following:
“In the past, some FHA borrowers have paid annual mortgage insurance premiums throughout the life of their mortgages. Effective for all loans closed on or after January 1, 2001, FHA’s annual mortgage insurance premiums will be automatically canceled under the following conditions:
*For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the loan to value ratio reaches 78 percent, provided the mortgagor has paid the annual mortgage insurance premiums for at least five years.
*For mortgages with terms 15 years and less and with loan to value ratios 90 percent and greater, the annual mortgage insurance premiums will be canceled when the loan to value ratio reaches 78 percent, irrespective of the length of time the mortgagor has paid the annual mortgage premiums.
*Mortgages with terms 15 years and less and with loan to value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.”
The FHA also says:
“FHA will determine when a borrower has reached the 78% loan to value ratio based on the lower of the sales price or appraised value at origination. New appraised values will not be considered. For example, if the lower of the sales price or the appraised value at origination was $100,000, when the loan amount reaches $78,000, FHA will no longer collect annual mortgage insurance premiums on the loan. Cancellation of the annual mortgage insurance premiums will normally be based on the scheduled amortization of the loan. However, in cases where the loan payments have been accelerated or modified, cancellation can be based on the actual amortization of the loan as provided to HUD by the servicing mortgagee.”
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July 16th, 2008 at 9:07 pm
I don’t understand- two lenders have told me that within the last two months a new rule was insituted that required pmi to be paid for 5 years from the beginning of the loan regardless of the loan to value ratio. Is this true? fyi it’s new mexico.