Profile picture for bluekat29

mortgage insurance premium(MIP)

I have an FHA loan. Due to a low down payment, I was required to have MIP.
Fast forward 2 1/2 years and now the value of my home has increased significantly. I was told that I can now request to have the MIP dropped.
Any truth to that?
  • February 26 2014 - Sacramento
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Answers (13)

Good morning bluekat29,

There are many valid answers so far to your question, most importantly those citing your need to accomplish 78% of original value before you can consider requesting MIP cancellation.  

I see from your recent reply-posting that you're consulting a local mortgage professional. Great idea!  Some suggestions for that consultation:

1. Check the Loan Originator's employment history on NMLS Consumer Access website.  You definitely want to work with someone with at least 15 years experience.

2. Work with a Direct Lender.

3. The Loan Originator should want to review ALL your documentation.  This is the mark of an experienced PRO.  By doing so, the Loan Originator can complete a properly thorough analysis of any options available to you for refinancing out of your current FHA loan.

4. Be sure to compare the costs of your closing on a new loan with the money you're saving monthly.  We're required to do this for you by calculating a "net tangible benefit" from the refinance, but it's something you should be aware of as well.  Here in NY with closing costs being so high, it's often not worth it for a consumer to refinance, even if saving a considerable sum monthly!

All the best!
Trevor Curran
NMLS #40140
  • March 03 2014
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Hi Bluekat29

sorry you wont be able to remove the mortgage insurance even though you have reach 22 % equity.  best scenario is to refinance to conventional loan . 

good luck 

omar khamisa
  • March 03 2014
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Profile picture for PaulMcCausland
I agree with the posts regarding the 78%. If you are going to keep the property long enough to justify the cost of a refinance, then refinancing would probably be prudent at this time.
I'm here to help,
Paul
  • March 02 2014
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Years ago, Wells Fargo told me that they wouldn't drop the MIP on our FHA loan... We refinanced into a conventional loan since the value of the property had increased.

  • March 01 2014
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A loan mod? That is a sick recommendation. Contact Brookstone Mortgage and Courtesy Mortgage below for a professional experience. Who is your loan with now? 
  • February 28 2014
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Profile picture for bluekat29
Thank you all so much for your responses. They are greatly appreciated.

I had a brief chat with my lender, which left me quite discouraged. He was rather condescending and was still talking when I disconnected:). He actually laughed at my request to eliminate the MIP. A few days ago, I received a packet from him encouraging me to consider a loan modification. I don't think that's in my best interest.
 
Nevertheless, thanks to your responses I will be speaking with a mortgage specialist next week. I have never missed or been late for a payment. The value of my house went from 131k to 202k; my credit score is 760; my mortgage rate is 4.25%.
  • February 28 2014
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The person who told you that you can request to have your mortgage insurance dropped was technically correct, but unless you have paid for 5 years and your balance is at 78% of the ORIGINAL appraised value, the answer will be "no."

The real questions is "do you have enough equity to refinance out of the FHA loan into a conventional one?" There are lots of questions to ask to make that determination: 
1. Exactly when did you get your FHA loan? The FHA mortgage insurance rate was .50% from April 2010 to October 4th 2010, then it changed to .90%. It changed to 1.15% on April 18th 2011, to 1.25% on April 9th 2012, and to 1.35% on April Fool's Day 2013. This is important because you effective rate is your note rate + the mortgage rate. You should compare that to current rates plus any mortgage that you may need today.
2. Just how much equity do you have? (In other words, what if the current value verses the loan amount?) Obviously this is important to determine if you will need conventional mortgage insurance.
3. What is your credit score? This is important because conventional loans are much more sensitive to credit scores. The best rates require a 740 score, and scores in the 600s will have higher rates.
4. What is your loan amount? The bigger the loan amount the bigger the savings. This is important because many costs are not related to the loan amount, so the higher the loan amount, the easier it is to recover those costs with the lower rate or lender rebate.

It may be worth looking into refinancing, but unfortunately removing the FHA mortgage insurance is probably not an option – unless you put down more than the minimum when you bought. If you havew further questions feel free to contact me through my profile. Best of luck.
  • February 27 2014
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You can ask for the MIP to be dropped but there is still a long time before that will be seriously considered by the lender. If you want to get rid of the MIP as soon as you can, you may want to consider a refinance. This is a popular option for people in your situation who want to get out of the MIP. You can refinance into a conventional loan which will drop the MIP. I recommend that you explore your options with a professional and compare them side by side. So the best thing for you to do is to speak with a knowledgeable lender to see if you can get started on financing a new home. If you need additional assistance, feel free to reach out. Good luck!
  • February 27 2014
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Profile picture for Arizona Mortgage Pro
If your home value has increased significantly, it is definitely time to talk with a local mortgage professional about refinancing. If it has increased enough (20% equity), you may be able to get rid of mortgage insurance in general. Many people are in your same boat right now here in Arizona and refinancing out of their FHA into conventional loans to take advantage of the recent boost in home values. 
  • February 27 2014
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At the time you entered into your FHA loan, the minimum amount of time for the MIP to stay in place per FHA would be 5 years. If your equity has increased substantially enough to allow you to refinance into a Conventional Loan, this may be a beneficial option for you. It is definitely worth having a free mortgage analysis done to determine the actual benefit based on your specific qualifications. You should contact a Mortgage Professional directly to review your options. If you have any additional questions, feel free to contact me through my profile. All the best to you!
  • February 27 2014
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Profile picture for Brookstone Mortgage
You should have someone look at your situation to see if a refi would be a good move for you at this point. If my memory is correct, FHA rates 2 1/2 years ago were pretty close to what they are now so even with only 5% equity, the likelihood of you seeing a benefit is good. 
  • February 26 2014
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FHA does not allow insurance removal via increase in value. Assuming your loan term is greater than 15 years, as Wayne mentions you will need to make 60 payments and have your balance reach 78% of your purchase price (or appraisal value at purchase whichever is lower). In CA your situation is very common due to rapid appreciation in home values, the only way to remove your insurance sooner is to refinance. Your current interest rate compared to what you qualify on new rate will determine if the refinance is worthwhile, often you will see new rate is a bit higher but overall benefit still worthwhile due to removal of insurance. If you made minimum down payment and pay only the minimum monthly amount required each month, FHA is typically 11 years for insurance to drop off.
  • February 26 2014
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You can request the MIP be dropped in 2 1/2 yrs ( 5 yrs from closing date minimum) and original loan balance reduced to 78%.  If you have at least 5% equity it would be worthwhile to see if a conventional refinance would be beneficial. What is your loan balance, rate, and current value?
  • February 26 2014
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