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Old 05-03-2015, 10:51 PM
 
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Question about a home I'm getting ready to purchase... Hasn't been appraised yet but after settlement I expect to have a loan to value ratio of about 77-78%. As of right now I'm planning to use an fha loan though with only 3.5% down. This means I'll need to pay a monthly pmi payment and also will have a mortgage insurance premium added on which will be paid throughout the life of the loan... My question is, is there any way to get out of this pmi? Pmi is about $160 a month and the mip is over $4000. On a conventional loan does the lender still use loan to value ratio or purchase price, whichever is less, to determine if pmi is needed? Am I stuck paying it for now until i can refinance?
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Old 05-04-2015, 06:33 AM
 
Location: Southern California
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Yes you are correct, you are stuck.
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Old 05-04-2015, 07:07 PM
 
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So isn't PMI supposed to drop if LTV value falls below 80%?
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Old 05-04-2015, 07:27 PM
 
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Quote:
Originally Posted by YelloJacket View Post
So isn't PMI supposed to drop if LTV value falls below 80%?
PMI on FHA loans are for the life of the loan now. Also, don't be surprised when the house doesn't actually appraise for as high as you expect. Remember, if it was worth that much more, someone else would have bought it for a higher amount.
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Old 05-04-2015, 08:37 PM
 
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Originally Posted by Smooth23 View Post
PMI on FHA loans are for the life of the loan now. Also, don't be surprised when the house doesn't actually appraise for as high as you expect. Remember, if it was worth that much more, someone else would have bought it for a higher amount.
I understand, no one would sell house for less that 80% of the appraised value - I was more referring to the point in time when I build >20% equity.

So looks like the only way to get rid of the PMI is to refinance out the loan?

* I just want to make clear that what I am referring to when I say PMI is the annual mortgage insurance (0.55% of P) that I pay with monthly installment, not the upfront 1.5% FHA insurance that gets tracked on the the Principle.
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Old 05-04-2015, 08:44 PM
 
Location: Plano, Texas
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Why not do 5% down, and go conventional? You will still have mortgage insurance, but it will be less per month and fall off once you paid balance down to 78% of purchase price. Better yet, do a 80/15/5 mortgage. That is a 80% first lien, a 15% second lien and a 5% downpayment..... there is no mortgage insurance.
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Old 05-04-2015, 08:49 PM
 
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Originally Posted by VictorBurek View Post
Why not do 5% down, and go conventional? You will still have mortgage insurance, but it will be less per month and fall off once you paid balance down to 78% of purchase price. Better yet, do a 80/15/5 mortgage. That is a 80% first lien, a 15% second lien and a 5% downpayment..... there is no mortgage insurance.

The conventional loan was 4.5% interest rate which in my calculations came out to be more expensive than 3.75% FHA including mortgage insurance (for some reason - please correct me if this is a foolish mistake).

I heard 80/15/5 is no longer being offered by big lenders like quicknloans? Also I am not sure how big the interest rate will be on 15% piggyback loan. Any ideas?
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Old 05-04-2015, 08:52 PM
 
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You needed to shop around. 4.5% on a conventional loan is pretty high.
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Old 05-04-2015, 08:57 PM
 
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Originally Posted by piyf View Post
You needed to shop around. 4.5% on a conventional loan is pretty high.
Thats because I am paying only 5% downpayment. I will be getting like 4.0%ish if I put down 20%.
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Old 05-04-2015, 08:58 PM
 
Location: Plano, Texas
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Quote:
Originally Posted by YelloJacket View Post
The conventional loan was 4.5% interest rate which in my calculations came out to be more expensive than 3.75% FHA including mortgage insurance (for some reason - please correct me if this is a foolish mistake).

I heard 80/15/5 is no longer being offered by big lenders like quicknloans? Also I am not sure how big the interest rate will be on 15% piggyback loan. Any ideas?
Depending on the state where you are buying, 80/15/5 may not be available. I do them all the time for my Texas clients.

Currently, the mortgage insurance on FHA with 3.5% down is .85...so your FHA rate of 3.75 + .85 for MI, gives you a total FHA rate of 4.6. And the MI never falls off, it will decrease a little but that's it. Oh, and don't forget the 1.75% upfront FHA fee that you are also paying. It will be added to your loan amount. So, the 95% conventional may have a slightly higher payment, but much less expensive in the long run.

I would also suggest you find another lender. They don't want to offer as they are a bit more work and as a loan originator, we are unable to make money doing 2nd liens. Maybe quicken doesn't want to offer since they cant make money on it.

In Texas, a 15% 2nd would be 5.75. A conventional 80/15/5 is better than doing 1 conventional loan to 95% and much much better than FHA. I am only doing FHA loans for clients that cant qualify for conventional. Only way the rate would be 4.5% is if you have questionable credit. if you have fico over 720, then that is a horrible rate. If you do have over 720 and they offered 4.5% conventional and 3.75% fha, it seems to me that they are trying to steer you toward FHA. Banks make the most money on FHA.
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