Did you know that you can get a house for as low as 3.5% down payment and a low credit score with FHA loans? Yup, that’s right! It’s why everybody likes it. However, you might find yourself in a monthly mortgage insurance premium, and not everyone can remove it from their loan.
The origin of your loan and how much you are willing to put as down are two of the main factors that can affect whether or not your mortgage insurance premium (MIP) can be removed or not.
So here’s a simple tip before we get into the removal of your mortgage insurance premium from your FHA Mortgage Loans San Antonio, TX. This 2019, mortgages that are backed by the FHA with a down payment of less than 10% can no longer have a removable PMI.
It will stay for as long as you still have the loan. So is there a remedy for this? Yup, there is! You can refinance into another loan called the conventional loan by the time the equity is already at around 78%. Whew! Thank goodness.
Wait It Out
Based on the $679,650 maximum loan for FHA, the MIP can go as far as $500 per month. That’s a lot. Your payments should be following the amortization schedule, and by the time your loan to value ratio is at 78%, the mortgage insurance premium amount will disappear automatically.
When we calculate the number of years for this to happen, it’s around 11 years providing your closing date is from December 31, 2000, to June 3, 2013.
If your loan is before June 3, 2013, and you have made prepayments on the principal mortgage amount, the unpaid balance will go below 78% faster than what the amortization schedule is showing. Even though it has been said that the mortgage insurance premium amount will disappear by the time your loan to value ratio has reached 78%, you might not see much of a difference on your monthly mortgage.
It’s not until the servicer will recalculate all of your payments which only happens once a year. As such, you can contact your mortgage company to learn what are the requirements in removing that premium.
Accept It As Permanent
Last 2015, the FHA has required that mortgage insurance premiums for houses that were bought with lesser than 10% down payment. If the down is less than 5% for a home that costs less than $625,500, your monthly payment will have an added 0.85% annual mortgage insurance premium for a fixed mortgage of 30 years.
For homes that require a maximum FHA loan amount of $679,650, the mortgage insurance premium will be at 1% for the whole life of the loan. On the other hand, loans that are amortized for over 15 years will pay a lesser mortgage insurance premium of around 0.15% for those loans with lower than $645,500 amount, the ones above will have a 0.05% less.
Aside from the ones mentioned above, you can refinance it away or buy with a down payment of 10% or more. It’s up to you. Be sure to ask your lender the requirements.