FHA: On a 30 year do you only pay mortgage insurance for 5 years?

I ‘m approved for a Conventional Loan, I have great credit  and I'm  going to  put  $10000 plus down .But I think the FHA is a better deal, lower interest rate and the Mortgage Insurance on a FHA  you only pay for 5 years on a 30 year. Even if i have to pay 1% up front and $20 more on morgage insurance for 5 years .What do you think? Is it true you only pay mortgage insurance for 5 years compared to the conventional of 80% of the loan?

  • September 25 2011 - US
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Answers (13)

Patrick, I believe the information you are referencing is when PMI drops off of conventional loans, my information was for FHA loans.
  • September 25 2011
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I agree with Shane's answers and specifically about FHA MIP term.............. compare FHA payments vs con'v. though late in process to be doing this now.
  • September 25 2011
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I believe Shane has it correct, it will not come off until they pay the loan down to 78% of the appraised value or purchase price, whichever is lower. I have never seen any other verbiage from HUD other than 78%, do you have a link to that?
  • September 25 2011
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Slight correction to Shane's reply.  FHA monthly MIP can be cancelled at the borrower's request at 80% LTV based on the original sales price / appraisal.  78% is the LTV at which it automatically cancels a couple of months later.
  • September 25 2011
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Closing cost around $3,568+ $2,060 prepaid Items... S0 cash required to close after all closing is $11,628.. .... $10,000 down + we have our $2000 earnest money deposit + $1900 back from the Realtor to use  also..Its a program from my work..
  • September 25 2011
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We are paying the %1 for the year of  mortgage insurance and the other one will be in our mortgage payment. We are paying $180,000 for the house, $4000 of which is going to our closing. The Realtor is giving us 1% of the total sale back, and the loan offer is also have credit going towards our house. The loan offer  ordered the  appraisal(so she said), but have not  heard if it started , she did ask me to feel out the appraisal dis closer and get it by Monday ( so it can close faster).. But all the financial information, inspection, offer excepted, earnest money,rate locked etc etc.. Its stressing me out.. Appraisal (I hope is done or started by then)..What steps are after Appraisal?  This home was sale by owner from a agents, so I think (or hope) it might go faster..
  • September 25 2011
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poet.  A little confused know by the numbers

1. Are you paying the UFMIP up front or is it financed into the loan amount?  Finance it in and cut down on your out of pocket expense.  Will result in all of about $8 in your payment.
2. Are you getting a $4000 credit for closing costs.  If so that is  good start.  Just make sure the basic lender fees are not too high so that you are not getting the best use out of the $4000
3.  Are your total closing costs/prepaids adding up to a little over $9000

20 days before closing and the appraiser has not been out there yet?  I hope all of you other paperwrok is in order b/c this is cutting it close.  I would be on the phone first thing tomorrow AM, to make sure proper expectations are set for everyone.

  • September 25 2011
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How long before the Apraisel should I know if the funding is there or not or if I have to go with another lender ?
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I have excellent credit so the loan officer first signed me up for conventional, then I told her I prefer  FHA.   With the $4000 credit for closing, the cash required to close is $11,628 ( that's including my $10000 down paymen & the 1% premium for pmi) . The deadline to close is OCT 14 , the apraisel is next week.Thanks for the great info.
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Poet...Based on the numbers you provided your only choice is FHA.  The down payment is 3.5% or $6300 on a $180,000 sales price.  You will have $3700 left over to cover closing costs.  At 3.875%, you lender should be able to help you out with the rest of the closing costs in the form of a lender credit. If you are making just the basic payments, you will have PMI in that 9-10 year range that Shane menitoned
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The APR is high on FHA loans because of the mortgage insurance, as it's an APR affecting cost you are paying all the while.  That is why APR's will typically be higher on mortgages with mortgage insurance than those without.
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Im going to put $10,000 down,  on $1800,000 ($4000 of that  is going to closing). Got locked in at 3.875 ( but the APR seems high at 4.721%) on a 30 year.  Its our first home and a lot of grey areas  in the picture. it.Thanks for the info?
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With FHA financing and terms longer than 15-years, you need to pay the monthly mortgage insurance for at least 5 years and also until your mortgage balance gets to 78% of the home's value when you obtained the mortgage. 

If you put 5% down on an FHA loan, 30-year fixed, and just made the minimum payments, you'd end up paying the annual mortgage insurance for approximately 9 years. 

If you put 5% down, and paid your mortgage down to 78% of the value the day after you got the loan, you'd still be required to pay it for 5 years.

With conventional financing there are other mortgage insurance options than paying the monthly amount - you should also have the option of paying a lump sum in lieu of the monthly amount or taking a higher interest rate instead of the lump sum or the monthly amount.  If you have not gone over those options, ask your loan officer about them.
  • September 25 2011
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