Comments on: How Much For FHA Mortgage Insurance?

By: Austin

Austin — Fri, 09 Oct 2009 17:55:03 +0000

How does FHA determine value? New appraisal? I am getting the run around on this subject, I was told that LTV has nothing to do with current value, which is stupid. Just another way for them to try to make money.

By: jennifer

jennifer — Mon, 15 Jun 2009 18:10:26 +0000

I will be getting an FHA mortgage and I am putting 20% down on the loan. I am being told I need to pay PMI insurance “no matter what” on a FHA loan. Is this because I am taking out a 30 year loan, not a 15 year?

By: Ed

Ed — Wed, 03 Jun 2009 17:08:05 +0000

Michael, my understanding is what you are talking about is Private Mortgage Insurance. This was an extra charge when you were going with a lender and your Loan to Value was over 80% on the loan.

What Patricia is talking about is the mandatory FHA MI that is required for any FHA loan, no matter what the loan to value is, and it is a minimum of 5 years, and longer if your value is above 78% loan to value. If your loan is 15 years or less, then you are not facing any FHA MI under 95% loan to value.

Clear as mud.

By: Michael

Michael — Sat, 09 May 2009 08:05:10 +0000

Whoa! Hold on, folks. To Patricia Mark, Mortgage insurance is only required for borrowers with less than 20% equity at time of purchase or refinance. In your case, a $45,000 mortgage on a home valued at $150,000 would not require mortgage insurance AT ALL! As long as your LTV (loan-to-value) is 80% or less (or $120,000 or less, in your case), there is no insurance, upfront or monthly.

Years ago, a buyer had to bring 20% to the table. The rationale for banks has not changed. They are essentially willing to lend to a buyer or a refinancer if their risk is limited to 80%. Mortgage Insurance is simply an instrument which protects lenders from “risky” borrowers with less than 20% equity. Once any borrower pays their principle down, or as soon as their home value rises, so that loan-to-value reaches 80% or less, they can cancel the ongoing mortgage insurance payments. The 5-year rule simply means that most people reach 80% in 5 years (on 30 year loans); but the more important factor is hitting that 80% mark.

How do you calculate? Take the value of your current mortgage loan balance (total) and divide it by the value of your home. If the answer is .8 or less, you should not be paying mortgage insurance and you need to remove it.

Incidentally, FHA refinances are eligible for a refund of a portion of the original upfront mortgage premium; the amount of which depends on how long payments have been made.

If you are claiming a higher home value, you’ll need to have it re-appraised first. FHA has a form to complete and file, and that’s it. To learn more, read the HUD Mortgage Letter 8-16 posted above.

By: Barbie

Barbie — Tue, 27 Jan 2009 21:27:35 +0000

I’m confused too…we are looking to refinance our home and our mortgage broker told us, that on a FHA loan, that the PMI will drop after 5 years, regardless of the Loan to Value ratio? Is he feeding us bull?

By: Peter G. Miller

Peter G. Miller — Tue, 20 Jan 2009 19:01:49 +0000

Patricia –

No. The monthly insurance premium ends once the original loan balance has been paid down 22 percnet.

By: Patricia Mark

Patricia Mark — Sun, 11 Jan 2009 16:25:49 +0000

I want to refinance my mortgage for 45,000 ( the balance due) to get a better interest rate. My home is valued @ 150,000. I am told I will have to pay PMI until the loan is paid off. It is approx 20. per month. Is this correct?
Thank you,
Patricia Mark

By: peter

peter — Thu, 17 Jul 2008 04:07:40 +0000

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.