Articles Tagged With: PMI (Private Mortgage Insurance)

March 13, 2024

Home Loan Mortgage Insurance Requirements

When it is time to buy a new home, borrowers have important decisions to make about mortgage insurance. Do you know who is required to pay for mortgage insurance and why? There are home loan programs that offer the option of paying 20% down and sidestepping the lender’s mortgage insurance requirements. Other mortgage loans may require borrowers to come up with a larger down payment to take advantage of the option to stop paying mortgage insurance after 11 years. Some mortgages have no insurance guidelines in this area at all. We examine these programs below. What To Know About Conventional Loan Mortgage Insurance There is no national standard for conventional loan mortgage insurance in terms of lender requirements. Borrowers can expect to pay 20% down on a conventional loan to avoid | more...

July 12, 2019

The Difference Between Homeowner’s Insurance And Mortgage Insurance

By Bruce Reichstein

The journey toward home ownership costs money; you need to save for your down payment, closing costs, inspection fees, and mortgage insurance. But there is an expense you should also know about that protects you from fires, theft, and other property damage-the homeowner’s insurance policy. What is the difference between mortgage insurance and homeowner’s insurance? Borrowers need to know the nuances and be fully prepared to become a homeowner by understanding what protects YOU and what protects the LENDER. FHA Mortgage Insurance Protects The Lender FHA mortgage insurance premiums are paid as part of your monthly mortgage payment. You are required to pay an Up-Front Mortgage Insurance Premium (UFMIP) and a monthly mortgage insurance premium. These payments are designed to protect the lender in case the borrower defaults on the | more...

November 7, 2017

Why Do I Have To Pay For Mortgage Insurance On An FHA Loan?

By Bruce Reichstein

Why do I have to pay for mortgage insurance on an FHA loan? Borrowers who are used to the terms and conditions of conventional mortgages will know that (depending on the lender) without a substantial down payment, conventional loans require private mortgage insurance (PMI) to protect the lender in case of loan default. FHA mortgages also require loan insurance, but not through a private company. Instead, the FHA requires the borrower to pay a mortgage insurance premium as part of their monthly mortgage payment, and also an Up Front Mortgage Insurance Premium (UFMIP) at loan closing time. It’s easy to get Private Mortgage Insurance (PMI) confused with the FHA’s Mortgage Insurance Premiums (MIP) but they are not the same and FHA mortgage insurance is handled differently and has different requirements | more...

FHA Loan Rules: Using Rental Income to Qualify for a Mortgage Loan

June 15, 2017

Can You Refinance An FHA Loan To Get Rid Of PMI?

By Bruce Reichstein

We’ve been discussing home loans, mortgage insurance, and the differences between FHA home loans and conventional mortgages. One common question that comes up when comparing FHA loans to non-FHA options? “Can you refinance an FHA loan to get rid of PMI?” The proper answer to this question is that FHA loans do not require PMI, also known as Private Mortgage Insurance. That does not mean the borrower won’t be required to pay for mortgage insurance, but for FHA loans this is an expense factored into the mortgage payment as part of the loan transaction. The borrower is required to make an FHA Up Front Mortgage Insurance Premium payment as part of closing costs (it can be financed into the loan if the borrower chooses) and make a monthly mortgage insurance | more...

June 15, 2017

Do I Need FHA Mortgage Insurance?

By Joe Wallace

In a recent blog post we discussed the differences between FHA mortgage loans and conventional home loans. One of the most important differences between FHA mortgages and conventional loans is the mortgage insurance requirement. Conventional loans may, depending on the size of your down payment and other factors, require the borrower to put as much as 20% down. Those who do not put a certain percentage down on a conventional mortgage may be required to carry private mortgage insurance (also known as PMI). FHA home loans, on the other hand, require a minimum 3.5% down payment and have no private mortgage insurance requirement. However, FHA mortgages do require the borrower to pay for mortgage insurance. This requirement includes an Up Front Mortgage Insurance Premium (UFMIP) and a monthly payment (MIP). | more...

December 14, 2016

Mortgage Insurance Premiums, Down Payments, And FHA Loans

By Joe Wallace

Some borrowers get confused about the FHA’s required mortgage insurance premium (MIP), the Up Front Mortgage Insurance Premium (UFMIP) required to be paid at closing or to be financed into the loan, and private mortgage insurance (PMI). The FHA loan rulebook says of UFMIP, “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” UFMIP is considered a standard cost of an FHA mortgage loan and is a separate expense entirely from the down payment, also known as the minimum required investment. FHA loan rules, as stated above, do permit the financing of the UFMIP, but the amount must either be financed entirely into the loan or paid | more...

June 11, 2015

FHA Policy On Cancelling Monthly Mortgage Insurance Premiums

By Joe Wallace

One commonly asked question about FHA loans involves when and how a borrower can stop paying FHA Monthly Mortgage Insurance Premiums. The information we’re discussing here does not apply to Private Mortgage Insurance, which something different than FHA Mortgage Insurance Premiums. Since we’ve mentioned Private Mortgage Insurance, borrowers who have it, (called PMI for short) should know the following as published on the government website, ConsumerFinance.gov: “The Homeowners Protection Act gives you the right to request that your lender cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. This date should have been given to you in writing on a PMI disclosure form when you received your mortgage. If you | more...

January 15, 2015

FHA Loan MIP Rules: A Reader Question

By Joe Wallace

A reader asks, “When calculating the annual PMI, are the bps assessed against the original loan amount or the current pay-off amount of the loan?” Assuming the reader is asking about annual FHA Mortgage Insurance Premiums, and not monthly Private Mortgage Insurance, it’s important to know the following: When the FHA and HUD announced a reduced annual Mortgage Insurance Premium, it created a table showing how the new Mortgage Insurance Premium (MIP) is calculated. FHA MIP is calculated, according to the FHA/HUD official site, by “amortization term, base loan amount and Loan to Value (LTV) ratio.” Here is the table published by the FHA showing the new FHA MIP rates: As you can see, there is a listing for the previous FHA MIP payment and the new FHA MIP payment. | more...

November 12, 2014

FHA PMI Rules: A Reader Question

By Joe Wallace

A reader asks, “Does the PMI not apply to down payments of 20% and above?” The FHA has changed the rules for PMI–Private Mortgage Insurance–and as a result all FHA home loans known as “forward mortgages” with case numbers assigned on or after June 3 2013 now have different requirements than previously approved FHA mortgages. FHA Mortgagee Letter 2013-04 rescinded a set of FHA PMI rules and enacted new ones in their place. The rescinded rules include the following changes as described in FHA Mortgagee letter 2013-04; “…rescinds the automatic cancellation of the annual MIP collection announced in MLs 2000-38 and 2000-46; ….rescinds ML 2011-35, under which mortgages with terms of 15 years or less and LTVs of less than or equal to 78 percent at time of origination were exempt from the | more...

September 15, 2014

Assessments Versus FHA Appraisals: A Reader Question

By Joe Wallace

A reader asks, “How is the home value assessed for a 203K, fixer-upper loan? For instance if we bought a home for $200,000, and also borrowed $30,000 in repair funds to improve the home, would the home value continue to be assessed at $200,000 or could an appraisal actually be used in this case? I have read that home value with FHA PMI purposes will only be assessed at the LOWER of an appraisal and the original loan amount.” For questions like these, terminology is important when it comes to arriving at the answer needed. For example, there is a big difference between an assessment and an appraisal–and appraisal is done by an FHA-assigned professional to determine the value of the property to be purchased or financed by an FHA | more...