Profile picture for user36308993

Convert FHA to Conventional Loan, drop PMI?

I'd like to refinance/convert my FHA loan (1 year old) to conventional in order to drop my very high PMI payments.  I only put down 3 1/2%, but according to Zillow, the value of my home has gone up about $150K.  I'm not sure how accurate this is, but recent comps are at least $50K higher than my loan.  Can I use the appreciation to put me over 20% and qualify for a loan with no PMI?
Thanks!
  • June 02 2013 - Studio City
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (19)

Laura,

California has a law that makes it so large/fast increases in property values do not result in large/fast increases in property taxes. Prop 13 (1978) states that the maximum tax on real property is capped at 1% of the assessed cash value (which is almost always the original purchase price), annual re-assessments are prohibited so long as you own the property (or add new construction to it), and the only increase in the base rate of the property allowed is an inflation adjustment capped at 2% (only if values actually increase). 

So, technically yes, the property tax in this scenario will probably go up. But the most it can go up is 2%. Even if the value increased by 200%. 

Greg
  • December 09 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

There are a lot of different ways to look at PMI. In this case, the major question is the true value after an appraisal is done. In some cases we may not get the PMI completely removed due to the value, however conventional mortgage insurance options are less expensive then the up-front or monthly PMI options. Depending on the value you may be eligible for low cost up front mortgage insurance, or lower monthly MI payment.

The other option would be to split the mortgage into a 1st & 2nd position to eliminate PMI, again this also depends on the appraised value. You may be able to do this refinance at no costs.

*For conventional loans the appreciated value would be accepted, as long as no equity is being taken out*
  • December 09 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for LauraDessinger
Wouldnt this activity cause an increase in property taxes?
  • December 09 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Yes! That will be perfect. We have a program where you only need 5% equity with no PMI.  Let me know if you need my help. Thanks, -Chuck
  • October 15 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Yes you can!!! I agree As long as you have at least 20% equity in your home (or 80% LTV) you qualify for a conventional mortgage. Contact me for any help...

Jason
  • September 22 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I would recommend to get the full detail from your lender but in order to drop your PMI you would need 20% equity in your property which you indicated you have based on Zillow's value and majority of lenders require you to be in that loan for 2-3 years before you could drop the PMI.

Good luck 
  • August 15 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Yes you can! As long as you have at least 20% equity in your home (or 80% LTV) you qualify for a conventional mortgage and no longer have to pay PMI which could save you quite a bit of money each month. I would be happy to help you out if you need help with this.  
  • July 31 2014
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Oz, it is a very confusing post due to the OP's statements:

It looks as though to lose $400+/mo in PMI, I'd be adding $900/mo in additional cost (going from 3.661% on $600K to 4.125 on $750K)

I thought in order to change to a conventional loan, I needed to go up to $750K to get the LTV to 80%?

Greg -  "What did you pay for the house and what do you think it is worth today? Maybe that is the confusion."

OP response - none

Since there was no response I assume Greg or another LO talked to the OP and explained the potential savings / new figures while user 4736428 believed the current balance is $750K based on their interpretation of the OP's comments.

Oz, what is your loan balance, current interest rate, and loan type and estimated value?    

   
  • September 25 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for OzHomeNet
I'm considering the same thing as the guy that posed the original question: One thing still puzzles me; After all of Greg Cowart's excellent answers and clarifications, I STILL don't get where, and how the (user4736428) keeps talking about making the Refi Loan on the appreciated value, instead of his/her LOAN BALANCE? Am I missing something?

Cheers.
Oz/
  • September 25 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for user4736428
You do realize that if your house is now worth $750K and you take out a loan for $750K then you are right back to being 100% LTV right?  ie your Loan ($750K) is 100% of the Value of your house ($750K) .  That's what LTV stands for: "Loan To Value [ratio]".   All you would be doing is turning the appreciation into cash.

If you're making such a basic mistake, perhaps you should have a more formal talk with a paid financial adviser.
  • June 09 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

You don't need to increase your loan amount at all. It just has to be under 80% of the appraised value to avoid MI completely. 

What did you pay for the house and what do you think it is worth today? Maybe that is the confusion.

Sincerely,
Greg
  • June 03 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for user36308993
Greg, I must have it wrong, then.  I thought in order to change to a conventional loan, I needed to go up to $750K to get the LTV to 80%?  I only put 3 1/2% down on my FHA loan. 

If you wouldn't mind steering me in the right direction here, I'd really appreciate it.
  • June 03 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I'm confused at your last comment. Why are you using a loan amount of $750,000 to determine your future payment should you refinance?

If your current balance is $600,000 figure your new loan will be $605,000 (with variables being closing cost structure, lender credits, impounds for taxes and insurance). Using the rate you are using, 4.125%, the P&I payment on a 30 year fixed at this loan amount is $2,932.13, with no MI (assuming 20% equity). 

How much is your current FHA P&I + monthly MIP payment? I'm going to assume around $3,425 ($2,750 on the P&I + $675 a month for the FHA MIP) based on the information given. If this is all even close to accurate (I did the best I could with the information you gave us so far) that is almost $500 a month, of $6,000 a year, difference between your current FHA and the conventional scenario.

Greg

 
  • June 03 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for user36308993
You've right about the savings being offset by the current rates.  It looks as though to lose $400+/mo in PMI, I'd be adding $900/mo in additional cost (going from 3.661% on $600K to 4.125 on $750K).  Bummer.  Thanks for the advice.
  • June 03 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I would act quickly on this as rates are on the rise.  The offset of savings when converting from FHA to Conventional is all based on the current market rates. 
  • June 03 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for user36308993
Thanks for your responses, that's what I was hoping to hear!
  • June 03 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Agree with others this is very common and keep in mind you don't necessarily need 20% equity for this type of refinance to make sense, Even at 85, 90 and possibly 95% loan to a value a refinance will make sense as it could lead to lowering the monthly mortgage insurance and allowing a quicker removal compared to FHA. Of course the current FHA rate and MI factor compared to current market rates for conventional must be analyzed to determine your potential benefits.
  • June 02 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Definitely. If you have been in your home for at least a year there is nothing that would stop you from using the new appraised value to qualify for a conventional loan. This is very common right now with all of the property value appreciation throughout California. 

Sincerely,
Greg
  • June 02 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Yes you can. This is very common for those who used an FHA to buy within the last few years! Just act quick because rates are rising and may be getting worse this week. You want to be able to maximize your savings. 
  • June 02 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.