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Do I have to pay FHA interest and PMI for 2 months when converting to a conventional

  • August 07 - San Jose
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Answers (7)

You keep paying your existing loan when due until the day of closing... 

Then, on an FHA loan, the payoff amount calculates the interest due to pay off the loan through the end of the month you close, regardless of what day you close.

So no, you will NEVER pay FHA interest and PMI for two months when paying off the loan and switching.
  • August 08
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if it's dated through 9/1 then I am responsible for paying an additional month of FHA interest and PMI (9/1-9/30)?  

I have seen it both ways, some Lenders will charge an extra months interest ( 9/1 - 9/30 ) if the payoff is dated the 1st while some allow the payoff good through the 1st w/out the additional month's interest. If they allow the 1st without an extra month, it will still trigger an extra month MIP. If the folks you are working with will not request a payoff good through 8/31 then you will have to request it yourself and send them a copy. Allow your Lender a couple days to post your Aug payment before requesting the updated payoff. Do not go beyond Aug 22 to close because there will not be time to go through rescission, fund, and payoff in Aug.  
  • August 08
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Profile picture for colm38

First of all, I'd like to thank you all (Joe, Jeff, Clay and Spencer) so much for providing this information and educating a true novice at this refinancing stuff!  



So I just want to clarify,  if I make my regular August mortgage payment which includes the PMI (this really covers July, not August,  as it's paid in arrears), and have the loan funded before August 31st with a payoff date good through 8/31, then I should only have to pay 1 full month of FHA interest and 1 month of PMI (which covers the month of August) along with prepaid interest?    



Now as for the payoff date, if the lender has it set at 9/1 already, am I allowed to ask that the date be changed to 8/31 or is that entirely determined by and at the discretion of the lender?   Because if I understand what you all have so kindly shared with me, is that if it's dated through 9/1 then I am responsible for paying an additional month of FHA interest and PMI (9/1-9/30)?   



  • August 07
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Both Clay and Eva are correct.  I hope this clarifies better for you.
For years, if an FHA mortgage was paid off before maturity, at closing the borrower would be expected to pay up a full month's interest. Even if a borrower closed on April 2, for instance, he or she would be charged interest by the servicer through April 30. Fannie Mae, Freddie Mac, and the Department of Veterans Affairs, by contrast, all require interest to be collected only to the day of principal payoff. - See more at: http://www.responsiblelending.org/tools-resources/headlines/controversial-fha-payoff-rule-to-end.html#sthash.MVx8FqyS.dpuf
  • August 07
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Thx for re-posting your previous question/thread that became locked to responses....

Your previous situation of closing on July 30 means the loan would have funded on Aug 5 which is why there were 60 days of interest in the payoff. When you make a payment the interest is paid in arrears so your Aug 1 payment is paying July's interest. You stated you are now looking to close on Aug 15 so that will have a funding date of Aug 20 ( after the 3 day rescission period ). You will pay 30 days of interest in the payoff if you make the Aug 1 payment ( and 12 days of prepaid interest ), then have the payoff dated good through Aug 31, not Sept 1, that will eliminate 1 extra month of MIP in the payoff.     
  • August 07
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Profile picture for Brian GFL Capital
are you referring to the two months after the funding of the new loan or during the refinance process?
  • August 07
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When you pay off an FHA loan you do have to pay a full month's interest and mortgage insurance. For example, if you were to pay off the FHA loan on August 10th, you would have to pay interest and mortgage  insurance through August 31st.
  • August 07
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