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Eliminating Mortgage Insurance From FHA Home Loans Issued Before June 3, 2013

Many borrowers who have FHA loans were persuaded by the ability to put a low down payment. Since mortgage insurance is typically charged on loans with less than 20% down, most FHA borrowers have mortgage insurance fees with their mortgage payments. The procedure for getting that charge eliminated depends on when the loan was issued by FHA. Below is details on eliminating mortgage insurance from FHA home loans issued before June 3, 2013.

Eliminating Mortgage Insurance By Paying Down the Mortgage

With every monthly payment that you send in, you pay down a fraction of your principal. In the first years, the portion going towards interest is more significant than the amount towards the loan balance, but this eventually changes. Mortgage insurance on FHA loans is automatically terminated when the principal is paid down to 78% of the initial value after a minimum of 5 years.  You may also send in extra contributions towards principal to get to this mark quicker but still must pay the mortgage insurance for a minimum of 5 years on a FHA loan issued before June 3, 2013.

With a majority of loans, you may insist that mortgage insurance be eliminated when the balance reaches below 80%. FHA loans, issued prior to June 3, 2013, require mortgage insurance to remain on the loan for at least 5 years, regardless of how you have paid the loan balance down to.  Unlike conventional loans in which PMI will be removed automatically when the loan balance reaches 78% of the appraised value of the property (at the time the loan was taken out), FHA loans require the PMI to remain on the loan for at least 5 years even if the loan balance is paid down to 78% of the appraised value.  FHA loans issued after June 3, 2013, will have PMI remain on the loan for the life of the loan if the loan to value is over 90% on a 30 year fixed loan, for example.  It certainly makes sense to keep an eye on this to eliminate mortgage insurance expenses for several additional months. Refinancing into a conventional mortgage may help in eliminating the mortgage insurance at a quicker rate.  Check your mortgage terms to verify what is available to you.

Change in Home Prices

LTV percentages are calculated using your mortgage balance and the purchase price or current property value. If home prices improve quickly, your balance might be less than 80%, eliminating mortgage insurance as a result. You must order an appraisal from your Mortgage company to try this option. The Mortgage company will send you an invoice for the expense, but it is worthwhile if your mortgage insurance is gone as a result. Also, you must hold your loan for at least 5 years to be eligible.

Guidance on Eliminating Mortgage Insurance From FHA Home Loans

Mortgage programs typically get modified over time. The information in this article is only an overview of typical FHA loan conditions. You must review your specific documents regarding eliminating mortgage insurance from FHA home loans. You can also contact your lending professional for additional information.

About Chris Graves

I grew up in Massachusetts, spent the majority of my young adult life in Boston, and own a home in Windham NH. I have owned properties in MA and NH. I specialize in mortgage lending in Massachusetts and New Hampshire and my company does have the ability to lend in other states. I graduated from the University of Massachusetts in Amherst Massachusetts in 2002. I have a Bachelor’s in Science. In addition to managing a team of loan officers my personal loan production is always in the top of the entire of company. I have personally been in the mortgage business for over 13 years. I pride myself with taking my clients from application to close in the smoothest and quickest way possible, while keeping them well informed during the entire process. I originate my own loans from start to finish and work hand in hand with my loan processors & underwriters to make sure I am updated to the minute with all of my files. I stay up to date with lending guidelines and speak with underwriters on a daily basis to ensure I am aware of all of the lending guidelines in place.

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