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Old 10-03-2014, 09:32 AM
 
25 posts, read 46,514 times
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In 2009 we bought a house for $243,000. We got a 30-year FHA loan at 5% for $230,000 (with a $13,000 down payment). After a long dip, Zillow says our house is now estimated at $248,000, so we were thinking of re-financing. I will be losing my job in six months and we were hoping a re-finance would at least lower the monthly payment. Also, we are paying mortgage insurance on the FHA loan and wnat to eliminate that if possible. Would a re-fi down to 4% conventional loan be worth the fees and closing costs? We would like to stay in the house at least another ten years (if we can afford it).
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Old 10-03-2014, 11:56 AM
 
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Quote:
Originally Posted by max_sterling View Post
In 2009 we bought a house for $243,000. We got a 30-year FHA loan at 5% for $230,000 (with a $13,000 down payment). After a long dip, Zillow says our house is now estimated at $248,000, so we were thinking of re-financing. I will be losing my job in six months and we were hoping a re-finance would at least lower the monthly payment. Also, we are paying mortgage insurance on the FHA loan and wnat to eliminate that if possible. Would a re-fi down to 4% conventional loan be worth the fees and closing costs? We would like to stay in the house at least another ten years (if we can afford it).
I don't think it's a good idea. Refinances have a certain amount of time before you break even. Yes, if you can stay there 10 years, you'll make that back, but somewhere in between is the cross over point. I realize you want to stay for 10 years, but with the uncertainty of a job loss around the corner, I wouldn't sink money into this just yet because you could wind up paying the fees and then having to move within a year. Then that's just money down the drain at a time when you need it most.

Assuming you bought around the middle of 2009, I'm guessing your mortgage balance is down to about $210,000. That means your loan would be 210,000/248,000 (assuming they use zillow's numbers) which puts you at 84.6% LTV. You need to be under 80 to get rid of PMI, so that means you would need to pay enough to get your mortgage balance down to 198,400 before PMI goes away.
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Old 10-03-2014, 02:40 PM
 
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Thanks Jeo. Even when I lose my job, we will still have another income that can pay the mortgage, but there won't be much left for extras. I didn't think PMI would still be required in a conventional loan.

Also, how does the bank know when to remove PMI? Do I have to tell them to send out an appraiser?
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Old 10-03-2014, 03:21 PM
 
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If you don't refinance, for FHA I'm fairly certain it's only based on the original purchase price, not the current value. I believe it automatically comes off at 78% but once at 80% you can request it. You also have to pay the MIP for a minimum of 5 years but it sounds like you've done that.
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Old 10-04-2014, 12:01 AM
 
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Also, there's something to differentiate based on current laws.

If you have an FHA, you don't actually pay PMI, you pay MIP. Same concept, but different rules and names. If you were to refinance as a new FHA, you would be stuck with the PMI/MIP for the duration of the mortgage. The new FHA laws don't let you out once you hit 20%.

Conventional loans will let you get away with no PMI at 20%. As GoPhils pointed out, it automatically comes off at a certain point, but you can request it's removal anytime after you hit 80%. Legally they have to remove it at 78%.

Any attempt to take advantage of the new value would require a reappraisal. The fact that zillow says your house is worth $XXX,XXX doesn't matter. You need an appraiser to say it's worth that, and their estimate doesn't always agree with zillow.

Also, something to point out, an official appraisal may increase your taxes since you've now confirmed your house is worth more and taxes are based on property value. Some of the savings you get may go out the door in terms of taxes.

Last edited by Jeo123; 10-04-2014 at 12:12 AM..
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Old 10-04-2014, 12:05 AM
 
Location: Southern California
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Losing your job in 6 month will create a problem when applying for a loan.
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Old 10-05-2014, 08:46 AM
 
6,027 posts, read 8,106,820 times
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Quote:
Originally Posted by Jeo123 View Post
Also, there's something to differentiate based on current laws.

If you have an FHA, you don't actually pay PMI, you pay MIP. Same concept, but different rules and names. If you were to refinance as a new FHA, you would be stuck with the PMI/MIP for the duration of the mortgage. The new FHA laws don't let you out once you hit 20%.

Conventional loans will let you get away with no PMI at 20%. As GoPhils pointed out, it automatically comes off at a certain point, but you can request it's removal anytime after you hit 80%. Legally they have to remove it at 78%.

Any attempt to take advantage of the new value would require a reappraisal. The fact that zillow says your house is worth $XXX,XXX doesn't matter. You need an appraiser to say it's worth that, and their estimate doesn't always agree with zillow.

Also, something to point out, an official appraisal may increase your taxes since you've now confirmed your house is worth more and taxes are based on property value. Some of the savings you get may go out the door in terms of taxes.
Yeah I was more referring to keeping his current loan which should be based on the old FHA rules. Actually now I'm drawing a blank as to whether getting rid of MIP for old FHA loans is based on the original purchase price or the original appraisal value. I should probably find out as I hope to do that with my FHA loan in a couple years haha.

It sounds like if he refinanced he would go conventional, but probably good that you clarified.
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Old 10-05-2014, 11:46 AM
 
Location: Southern California
4,451 posts, read 5,551,775 times
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Quote:
Originally Posted by GoPhils View Post
Actually now I'm drawing a blank as to whether getting rid of MIP for old FHA loans is based on the original purchase price or the original appraisal value.
The lower of the two.
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Old 10-07-2014, 10:19 PM
 
Location: MID ATLANTIC
7,896 posts, read 19,322,577 times
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You really need to talk to a loan officer, but first you need to know how the employer will repl about your employment.

I have a customer that bought in 2012, closed in 2013 and his value in 2014 has increased to a 75% ltv. Getting his rate down on a 5/1 arm w/ no pmi is dropping his payment by almost $600. Now, I am not saying your mileage will be the same, but it doea warrant an in depth review. Even similar results w/ a 7/1 may prove beneficial for your family. Speaking in generalities is fine for some things on the www, but your own individual financial situation always warrants specific, individual review. Call the loan officer that put you in the home. They probably have much of what is needed at their fingertips.
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