When Can I Stop Paying My Monthly FHA Mortgage Insurance Premium?

November 1st, 2007

If you are someone that has had a FHA Loan for a period of time, you might not have realized that you don’t have to always pay mortgage insurance premium. I remember when my husband and I first bought our house this was something we talked about. Then as time went on, we forgot about it.

I did some research and thought I would answer this question here this time. What I am about to share is food for thought. You will want to get rid of your premium mortgage insurance because it is not tax deductible, like mortgage interest. I’m always happy to receive that statement at the end of the year from our mortgage company in preparation for our taxes.

When you first purchase a home, you are looking for all the deductions you can get. True you get a lot that first year you purchase the home more than the following years, because you have points as well as mortgage interest and some other items. Let’s get back to premium mortgage insurance and when can you stop paying it.

I must share that this very question was addressed in a lot of different places. One of them being moving.com. What I liked was that the lender could not force you to keep the PMI once the loan-to-value has gone below 80%, however, the lender will not advise you when you are eligible to discontinue the coverage and stop making the mortgage insurance premium (MIP) payment. I have to say, if the lenders did contact the buyers even months or years down the road regarding discontinuing their mortgage insurance premium, what do you think the buyers would think of their loan company?

I know that I personally would be recommending that loan officer to everyone that I knew would be purchasing a house. However, it is left up to you to keep a track of what is happening with your loan. To find out where you are with your loan, take a look at your most recent mortgage statement, even if you are paying electronically. The files are usually up to date. Divide the remaining principal by the original purchase price of your home. If that number is below 80%, call the lender and find out their specific procedure for removing premium mortgage insurance.

Before you do anything, remember, remember, it is the responsibility of the buyer (you) to track the debt to value ratio and make the arrangements to stop premium mortgage insurance.

I continued researching to see if there was any more information I could share with you that would help you answer this question. When I was reading the fha.gov website it actually gave more information based on the different loan amounts. Here is what I mean, it stated it you have a mortgage that is 15 years or less and the loan to value ratio of 90% and greater, the mortgage insurance premium will be terminated when the loan to value reaches 78%, irrespective of the length of time the borrower has paid the mortgage insurance premium. I want to caution you if you have a 15 year or less term, to check with your lender as to their procedures. Because I am always hesitant when terminology like “will” gets thrown around. Sometimes they don’t follow through.

Look at your statement and see where you stand with mortgage insurance payment. You might find that you can stop at this time. Follow your lenders procedure for discontinuing.

SSN Verification Changes for FHA

October 11th, 2007

Admittedly, this is a tad boring – but still important. (Like diplomacy, some might say.) FHA has made changes to its Social Security Number verification system that will extend the process a bit. Instead of instant approval, the process will require an overnight check – but with high application numbers that may be longer. There are details in a release from the Mortgage Bankers Association.

The Spirit of Giving

October 2nd, 2007

So Nehemiah and AmeriDream are suing HUD for banning DPA (down payment assistance). Let’s reivew what happens with DPA “gifts”:

The program works this way: Once contacted by a lender, Nehemiah sends a gift covering the homebuyer’s down payment. Average gift: $4,000. The seller of the home then reimburses Nehemiah, plus a fee.

HUD’s complaint is that often the sellers, despite being discouraged by Nehemiah, add those costs to the sale price. The agency says this leads to greater financial strain on the homebuyer, and more defaults for HUD, whose Federal Housing Administration insures the mortgages. “Loans made to borrowers who rely on these types of seller-funded assistance perform very poorly,” the agency said in its final decision banning the program.

If Nehemiah and AmeriDream are as devoted to consumers as they say they are, maybe they could use their corporations to help people in ways that don’t involve jacking up housing prices.

The Other Side of the Coin

September 27th, 2007

As with any hot news topic, the modernization to FHA Loans has many proponents as well as opponents. Although I am a strong supporter of FHA reform, I wouldn’t want anyone thinking that FHABook.com is unaware of the criticisms. This post by Dr. Housing Bubble presents an opposing view point. Although I don’t agree with many of the points, they are well thought out and worth considering. My biggest counterpoint to the article is that, although the FHA caters to borrowers who otherwise would have gone with a subprime loan, it is not a subprime. FHA has many more safeguards and guidelines to protect consumers that were obviously absent in subprime lending. FHA loans have been around for nearly three quarters of a century, subprime barely held on a decade.

On The Bright Side…

August 16th, 2007

All this doom and gloom may have you feeling very down in the dumps, but fear not! As Forbes points out, all this housing trouble may light a fire underneath the progress of FHA modernization. This is similar to the earlier story about how reforms should get moving after August, but its got the added delight of some bytes from HUD’s assistant secretary Brian Montgomery:

“Every day that we don’t get some sort of reform is a day that we can’t help families that are trying to get out from a high-cost exotic subprime loan,” Montgomery said.

Yes, FHA will be great for first time home buyers and those who are trapped in ever-rising ARMs.

To Modernize or Not To Modernize?

August 7th, 2007

As anyone who has scanned the pages of FHABook knows, I am all for FHA modernization. I think it will be a great service to borrowers and make the FHA more relevant in today’s lending market. Here is a column with some opposing views presented by Peter Miller on the Realty Times site.

I do understand Peter’s point that since FHA is currently making a comeback modernization may be unnecessary, however the aspects of FHA that need to be reformed are what allowed subprime to take over in the 90s. Just because subprime is in some hot water right now, doesn’t mean that something else won’t come along and defeat an outdated FHA again. I know we shouldn’t fix something that isn’t broken, but FHA has been broken for awhile and still needs a serious amount of fixing.

The FHA Today: Abridged Version

August 2nd, 2007

Check out this post from the Mortgage Cicerone that is chock full of information. It’s got information on DPAs, FHA benefits, and helpful lists with random FHA info and guidelines. Good insight and lots of information crammed in there. Here’s an excerpt:

FHA not only helps people buy a home, but helps them keep it as well. In return for protecting lenders against loss, FHA requires financial institution to offer assistance to borrowers experiencing difficulty making mortgage payments.

FHA Breaking into the Mainstream

July 24th, 2007

We’ve posted on a few different FHA related reports in The New York Times, and now it looks like CNN Money is catching on too. FHA is making its comeback! This CNN Money report offers 3 subprime alternatives (though I must say, this article is a LONG time coming. People could have used this last December.)

The options include:

  • FHA
  • VA
  • Community Development
  • And, yes, FHA does come first in the article. The section includes historical information, reform news, and steps to getting started.

    The Rundown

    July 13th, 2007

    The bloggers have been busy – Here’s what to check out:

  • On his Active Rain blog, Joe Adams shares his personal experiences with the positive changes in applying for FHA loans.
  • On his Active Rain blog, Scott Hoag explains why you don’t need great credit to get a great loan. (Though his title could be a bit more tactful.)
  • On FHA Expert, Jeff Belonger explains the credit requirements for FHA loans. (Tact included.)
  • Scott Hoag is a busy man! He’s also got FHA Frequently Asked Questions post. Good questions, straightforward answers.
  • Oh The Possibilities…

    July 10th, 2007

    Here’s a story in the Detroit Free Press by our dear friend Kenneth Harney (I really should stop pretending like I know these people, I can foresee myself getting into some sort of awkward situation someday.) About why traditional mortgage solutions such as Freddie Mac and the FHA can work, even in today’s uncertain market.