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FHA loan...am I stuck paying PMI forever?

4,623 Views | 27 Replies | Last: 5 yr ago by aTm papi
FDXAg
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AG
So I'm currently in year 6 of a 30 year FHA mortgage on my house (1st house). I obviously pay PMI each month. Was only a 150k loan and we had to go FHA because we didn't have much in the form of a down payment at the time.

We still owe about 125k on the loan. Rate is 3.25%, so pretty good compared to current rates. But are we stuck paying PMI forever? Would it make any sense to refinance into a non FHA loan to get out from PMI? I'm not in a financial position to pay much more a month on PITI than my current monthly payment, but I was wondering if I had an option that would actually lower my monthly payments.

We may only be in this house 5 to 7 more years, if that paints a clearer picture on our situation. I'm sick of seeing the $150+ a month going to PMI, but I recognize that I have a better rate than I could currently get today.
SteveBott
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AG
Only sell or refi
IWannaGoFast1
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AG
SteveBott
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AG
Actually now I remember they changed in that time frame. It will come down to month and year. Let me dig around when on a PC and I will find the cutoff date. Several years ago I looked for a client and he was one month late.
FDXAg
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AG
My loan originated in December 2012, fwiw
Ol_Ag_02
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AG
FDXAg said:

My loan originated in December 2012, fwiw


You can ask the lender to remove PMi when you reach an 80% loan to value ratio. The lender is required by law to remove it automatically at 78%.
SteveBott
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AG
Not FHA.
Jrod05
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AG
Not FHA anymore part of all the regs changed
CS78
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The right answer is you need to contact the company that currently has your loan and see what the requirements would be. It varies.
SteveBott
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AG
Those front line customer service folks may or may not know the correct answer. But yes call
Jay@AgsReward.com
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Sponsor
AG
If your loan was originated BEFORE June 3, 2013 you can potentially drop the monthly mortgage insurance. Unfortunately, if after that date you are stuck unless you refi into a conventional loan.

Link from HUD here: https://www.hud.gov/program_offices/housing/comp/premiums/prem2001
KC_Ag14
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AG
Currently with FHA, the MIP can cancel if you put down at least 10% - but not until 11 years into the loan. Rarely see this since the FHA program typically isn't a long term solution.
chris1515
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AG
What would your home appraised for now?
FDXAg
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AG
I'm pretty confident it would currently appraise for >250k
SteveBott
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Before you think you're done you need to find out if a higher appraisal will establish 22% equity is allowed. I could not get to Jay's links in a phone so I will try to check tomorrow
IWannaGoFast1
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AG
When I did mine, you couldn't use an appraisal for removing pmi from FHA loans.
SteveBott
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AG
Sounds like the last question answered then. OP contact your lender and request an appraisal. They will need to use their vendor. Should be 400-450 or so.
IWannaGoFast1
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AG
SteveBott said:

Sounds like the last question answered then. OP contact your lender and request an appraisal. They will need to use their vendor. Should be 400-450 or so.
Steve, I could *not* use an appraisal for mine. I ended up having to make a rather large payment to get my percentage high enough for them to cancel.
SteveBott
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AG
That's why I had a bit of research to do. FHA changed the program 3-4 times in the last 7-8 years. I'll check now
SteveBott
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yep pay down original loan amount only. Conventional lets you combine new appraisal

Missing the mark here which I normally dont do but I do not have much FHA business. Maybe 3-4 a year. I try to get clients to go conventional if all possible.
Deats99
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AG
Good FHA Removal Chart
A good plan violently executed now is better than a perfect plan executed next week.
-George S Patton
SteveBott
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AG
Deats perfect. That is exactly what I was going to try to find after my first post.
FDXAg
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AG
Thanks for that! Looks like I'm stuck until 78% LTV. Looks like quite a few years from now
hph6203
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AG
It might be worth looking to refi. The cost of your loan right now is 4.60% if I recall correctly (3.25% interest, 1.35% annual MIP). I don't believe your MIP is tax deductible if you're able to itemize. If you could get a 4.25% rate your P&I would stay roughly the same (~650.00) and you'd drop your 150/mo MIP.

Yearly Total
1700
1660 = 3360
1600 = 4960
1550 = 6510
1500 = 8010
1440 = 9450
1380 = 10830

Part of that is spread and reduced equity building, but cash now is worth more than equity later. If you can't get better than a 4.50% rate then you're pretty much just saving monthly on reamortizing the loan and I'm not sure it's worth the cost of a refi to do that. Almost certainly isn't. I think 4.25% is your mark of seriously considering it depending on origination and title charges. Escrow charges are a wash.
SteveBott
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AG
The OP can get 4.25 on a 15 year. There would be a possible payment shock though.
hph6203
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Am I high? I get on Lending Tree (I'm not willing to do more research than that) and they have advertised rates at 4.25, with "reasonable" fees. I've never had an issue with getting the rate listed on Lending Tree. Not sure that's 100% the way to go, but I've always just found the best rate with the assumption that whoever is closing the loan is going to ship it off to a larger servicer. On a strictly rate/term loan, with straight W2/1099 income for justification I don't see the harm in going with any somewhat major mortgage house, because it should be pretty straight forward.

I work back end mortgage so I'm not aware of the market quite as well, because there's a 30-60 delay in what I see as far as rates, and the company I work for is a large servicer that generally has some of the worst rates on the market so I can't really use that as a barometer for the market.
SteveBott
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My rates change daily. My 30 year is 4.25-4.375 no points and 15s are 3.875-4.0 so significant drop just two weeks later. Again every quote is based on unique factors in the individual file profile. FHA is at 3.875 but I hate their fees. I'm. I'm not sure your question.
hph6203
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Sorry, was more a comment on my knowledge than a comment on your response. Like I said I don't deal with the loan sale aspect so I wasn't sure if what I was seeing was contrary to actually available rates. I looked last week and the rates were advertised at 4.375 for a 30 year fixed and they seem to have dropped a bit since then.

I imagine 4.25 with no points would probably save the OP money, if they could actually qualify for that pricing.
aTm papi
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PMI was removed just this year on my FHA loan.
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