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PMI advice on FHA Loan

Hello,

I have an FHA loan, at a rate of 3.25% (I purchased my condo in October of 2013). I have a monthly PMI payment of $522. (I put down 5% at purchase and have great credit). Since purchase, the value of my property has increased by 14% according to zillow.com

What is the best advice for eliminating PMI in the near future?
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December 22 2013 - Brooklyn
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Best Answer
Agree with Hamp..Do not trust the value listed on Zillow

Agree with Clay...Contacting your servicer is going to be a waste of time.

When you refinance you will want to make sure you are working with a lender that is experienced with CEMA's so that you can avoid the hefty mortgage tax that is going to come with refinancing your home in NY State. Depending on your loan size, I might suggest looking at a 7/1 ARM.  You are going to be looking at quite a rate increase with the 30yr fixed rate.  You will still save because you are getting rid of the MI but that 7/1 ARM is going to keep your rate in the 3's provided your credit is good.  Happy to help if you would like to contact me through my profile
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December 23 2013
The quickest way for you to avoid your PMI would be to refinance your mortgage into a conventional. This would require an appraisal as the Zillow value cannot be used. Either way, the best thing for you to do is to speak with a lender to see if you can get started on financing a new home. There are lenders like myself that would be glad to speak with you to help you get the loan that you need. Well I hope this helps! If you have any further questions or if you would like a loan, feel free to contact me!

Good Luck!
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December 23 2013
Geeeeeezzzzz,,, PLEASE STOP WITH THE STATEMENT "THE MI IS ON FOR LIFE OF THE LOAN". It does not apply here BECAUSE THE OP BOUGHT THE HOME IN OCT 2012.  
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December 23 2013
You will need to refinance into a conventional loan. Your FHA MIP is with you for life if you keep your existing loan
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December 23 2013
The only chance to eliminate the mortgage insurance for your loan is to refinance the property to a conventional loan.  The mortgage insurance will stay on your loan for the loan on FHA programs.
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December 23 2013
Joe's suggestion is a good one. For this Borrower the annual MI is NOT for the life of the loan, it will fall off once the balance is paid down to 78% LTV with a minimum of 5 years of payments. That being said, if no additional principal is paid it will probably take another 8 years of payments to get to 78%. IMHO, if the OP will hold this property for an additional 7-8 years I too would recommend a 7/1 assuming renovations and any appreciation will yield a lower LTV. If this property will be held long term then best to run the numbers out 15, 20 years to see the total outlay since the existing loan is Fixed at 3.25%.  
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December 23 2013
rewpeh,
There are a couple problems you are going to run into as you have read below, here are some of the basics about MI on FHA loans

If your Mortgage was taken out after June 2013, then the MI will stay on your mortgage for the life of the loan itself.  Regardles of the percentage equity you have in the house unfortunately.  If you meant 10/2012 as I find it hard to imagine your house increased in value by 14% in 2 months, then your rules for removing MI are thus:  You need to wait 5 years and/or until the mortgage is 78% of the appraised value whichever takes longer.

Now if your rate is 3.25% and your MI is 1.25% then your effective rate is 4.5% so if you chose to refinance you will need to come in under the effective rate for it to really make scene in my opinion.
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December 23 2013
FHA mortgage insurance is extremely expensive.  There are local banks that are will to do a second mortgage up to 90% on a refi where you can piggy back the first and do a conventional loan.  The issue you have is that you will not get 3.25% on a 30 year currently.  If you put 5% down on an FHA loan that is a 30 year, you are not getting rid of mortgage insurance becasue it is for the life of the loan.

Good luck!
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December 23 2013
Michael,
Clay gave the answer as I was typing a reply........FHA mortgage insurance requires minimum of 5 years before there is possibility for elimination (prior to 6/13 - now life of loan if 95% LTV or higher), and even then it requires loan to be reduced to 78% loan to value of initial appraised value. Refinance to conventional loan is only viable option but appraisal would need to be high enough to support 90% or less LTV. It still is going to be a questionable benefit as your 3.25% rate can not currently be duplicated except possibly on an ARM.
Bottom line is you need to have a lender compare options (including 15 yr fixed loan - lower rate and lower PMI rate) to see what is beneficial.
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December 22 2013
The advice to contact your servicer is a waste of time. You could have improved the property $1M and the annual MI which you pay monthly will stay on your existing loan until you pay the loan down to 78% LTV and even if you pay it down tomorrow you have to pay a minimum of 5 years. Like Hamp said, refinancing is the only way to remove now if the improvements/appreciation get you to an 80% LTV or less. 
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December 22 2013
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Slight correction: I purchased over a year ago in October of 2012 (not 2013, that was a typo), and have made renovations to the property. Thanks for the advice Mitchell; I will contact my loan servicer. 
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December 22 2013
The value on Zillow is irrelevant. Refinancing is the only option.
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December 22 2013
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You really belive your property has appreciated 14% in 2 months?
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December 22 2013
Dear rewpuh:

Call your loan servicer and ask them what actions you can take to eliminate the mortgage insurance. If you have done renovations to increase the value of your property, they may take that into consideration. You will most likely have to pay for another appraisal attesting to the fact that the value of the condo has gone up.

Sincerely,
Mitchell Feldman
Associate Broker
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December 22 2013
 
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