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mortgage insurance premium advise

My wife and I have a FHA loan, original price 305,000 in 94564 area, payments with escrow is 2300 monthly @ 4.75%. I was contacted by BofA who handle or loan and they indicated that our value of home has gone up and is now ruffly 345000. He told me I now qualify to refinance at 4.6%  with the 28 years remaining and no more MIP. Does this sound like something I should look into or could it be a scam. My wife and I would like to have the MIP removed but wanting some advise
  • September 09 2013 - Pinole
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Answers (6)

John Saldivar,

FHA loans are great for getting people into homes because the credit requirements are more relaxed than conventional, along with other less stringent requirements. But once you've been in the property a while, and hopefully it appreciates, then the move to conventional makes sense for exactly the reason you said, 'drop the mortgage insurance.'

Today's market:
If you do have 20% equity, then refinancing could certainly make sense. You 'd get a no closing cost loan at 4.625% with great credit, enough income, etc etc.

If you only have 15% equity, you can have the bank pay your mortgage insurance for you at 4.75%, Closing cost about $1,000. 

The loan would reset to a new 30 year term. 

One last thing, since you're paying off an FHA loan, you benefit more if the refinance closes at the end of the month. The reason for this is because no matter when the FHA loan gets paid off, they will hit you with a full month of interest to the current principal balance. The prepaid interest on the new loan is per diem and so would be less if you wait until the end. You'll save money there.

Happy to help!

  • September 11 2013
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This is common practice, Also everything is regulated now through the NMLS so there is no way a lender can "Scam" you into a loan. You can look up the NMLS # on the NMLS website and see if they have had any complaints against them.

I as a lender refinance borrowers from FHA to a conforming loan all the time as people have mentioned below as well.

Good luck!
  • September 10 2013
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I do not think that your bank is trying to rip you off. One of the perks of a conventional loan is that you don't have to pay a MIP. This is actually something that happens amongst people in your situation so I don't think you have any reason to worry.

Well I hope this helps! If you have any further questions or if you need a loan, feel free to contact me. Good Luck! 
  • September 10 2013
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Refinance from FHA to conventional loan is very common now with property values having increased, Depending on your current MMI factor and new potential cost/terms available you might see a benefit for refinance. I would start by looking close at recent comparable sales in your area to get an idea of what a likely appraisal value might be. That amount will be the most important factor in determining the terms of your refinance and potential benefit. I wouldn't rely on B of A telling you the value as an accurate estimate.
  • September 10 2013
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Hi John,

It sounds like BofA is offering a Lender Paid MI type program. Usually added to your interest rate to avoid the monthly MI. I think it's a great option if the interest rate is low enough to benefit you. 

1. Today's rate was 4.625% or so. To cover the MI, the increase in rate would be approx 4.75%-4.875%....Depending on lender, rate sheet and day.
2. You have to also consider the costs- Lender and Title fees vs the fact that you are already 2 yrs in to the loan. If you can recover the cost within 24 mos...it may benefit. 

These are ball park figures. Just to give you an idea. Contact me through my profile if you want more details.
  • September 09 2013
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I can't say that it is a scam, however I can say that if you are doing an FHA you will be required to have MIP on that loan period. Should they move you to a conventioal mortgage you would need to be at a 80% LTV or lower to avoid PMI. My advice is to get more info about the proposed program and question him about the details of this product and ask to speak to a manager there. Should you need any other assistance reach out to another lender like myself and we will be happy to advise you,
  • September 09 2013
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