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I had a question about PMI (which I think is actually just called MI because we're getting an FHA loan). From what I understand, we'll have to pay MI until we have 20% equity in the home. My question is, if the house appraises for more money than what we paid for it, does that count towards our equity? Or do we have to pay towards 20% of our mortgage to get rid of it? Thanks
FHA requires 5yrs of payments or when the loan reaches 78% LTV from the AMORTIZATION SCHEDULE.
This means even if the home appraises to twice the value you bought it for..you will STILL have to pay 5yrs or 78% ltv.
MI is only 0.5% of your loan amount which is a good thing.
Quote:
Originally Posted by FLHomeBuyer
I had a question about PMI (which I think is actually just called MI because we're getting an FHA loan). From what I understand, we'll have to pay MI until we have 20% equity in the home. My question is, if the house appraises for more money than what we paid for it, does that count towards our equity? Or do we have to pay towards 20% of our mortgage to get rid of it? Thanks
Correct -- even if you were to contract in an FHA-insured product at 50%LTV for some reason, you'd still be paying 'MI' from the start for 5-yrs term. This arrangement is part of the insurance-risk equation, instead of the 80% (or so) industry standard for other insurers.
If we have to pay MI for 5 years, we're allowed to refinance before than if we want, right? And that way we'll get rid of the MI sooner.
We're pretty much only doing FHA because the builder is giving us down payment assistance through Ameri-dream. Otherwise, we would have done with another mortgage option. And from what they told us, in order to receive that money, we have to use an FHA mortgage.
If we have to pay MI for 5 years, we're allowed to refinance before than if we want, right? And that way we'll get rid of the MI sooner.
We're pretty much only doing FHA because the builder is giving us down payment assistance through Ameri-dream. Otherwise, we would have done with another mortgage option. And from what they told us, in order to receive that money, we have to use an FHA mortgage.
If we have to pay MI for 5 years, we're allowed to refinance before than if we want, right? And that way we'll get rid of the MI sooner.
We're pretty much only doing FHA because the builder is giving us down payment assistance through Ameri-dream. Otherwise, we would have done with another mortgage option. And from what they told us, in order to receive that money, we have to use an FHA mortgage.
It sounds like you are going $0 down. With that in mind you will probalby be paying MI/PMI for the 5 years or more no matter what loan you do unless you either expect major appreciation or plan on knocking down the principal by paying more than your regularirly scheduled payments.
What you say is a little different from what I've been told. I trust you more than the person who told me otherwise, and it is one more reason to be glad we found anther lender! But, for the next time we're in this bizarre mortgage world, * I want to know the real deal!!
We were going to do an FHA loan (were told that was the ONLY thing that would work for us) with 15% down. Within a couple of months after closing we estimated, and for SURE within 6 months no problem, we would have the loan down to 78% by paying on the principal early. Our loan officer knew the whole point of this was to not have to pay PMI any longer than necessary. Had we been able to close one month later we more than likely would have had 80% down, but we did not have 1 month to wait before we had to be out of our current rental. (Bad timing, right?!) BUT, based on what you're saying, even if we had paid the principal down early, we would not have been able to cancel MIP until the amortization schedule put us at 78%? So early payment would NOT get rid of the MIP with an FHA loan?
let me also say that when we thought we were going FHA I pulled up FHA's MIP info from their website, and didn't remember seeing that myself, about the 78% by amortization schedule. I *really* try to research the mortgage process so I know more what's happening, if that's possible in today's market! Is it possible an FHA approved lender would forget to tell me that our plans to pay down to 78% weren't worthwhile? Everybody's human, and there's so many details in this industry, so I could easily understand forgetting something, especially if it's an arcane detail that doesn't usually come up with the standard borrower.
The builder isn't giving you down-payment assistance through Ameri-Dream -- the builder's lender-of-choice is simply positioning you to receive it. Any FHA-insured lender can get this for you. The 15% you state isn't all Ameri-Dream money, is it?
Any 80%+ loan requires some additional insurance, either PMI or MI, or LPMI -- meaning the rate includes the insurance amortized over the full term. Also, you may get a prorated portion of your upfront MIP payment returned, which is required on all FHA mortgages, if you pay off the loan within 5 years -- you can get this money back.
Read the facts from the government:
hud.gov/buying/index.cfm
Per FHA the loan must be at or below 78% AND 5 years of payments unless on a 15 year mortgage.
Directly from FHA, "[SIZE=3]Those loans reaching the 78 percent loan to value threshold sooner than projected (but not sooner than five years from the date of origination except for 15-year term mortgages) due to advanced payments of principal will have the annual premium collections canceled upon the servicing lender submitting supporting information to FHA following the borrower's request provided that the borrower has not been more than 30 days delinquent on the mortgage during the previous twelve months."[/SIZE]
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[SIZE=3](see full instrutions at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/00-46ml.doc (broken link))[/SIZE]
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?!) BUT, based on what you're saying, even if we had paid the principal down early, we would not have been able to cancel MIP until the amortization schedule put us at 78%? So early payment would NOT get rid of the MIP with an FHA loan?
Loan Officer
