How to Cancel Your FHA Mortgage Insurance Premium?

fha-cancel-mipDid you know that FHA has increased the costs to insure their mortgages 6 times over the last 6 years??  For the last several years thousands and thousands of North Texas residents have used an FHA program to finance their new home.  FHA loans are popular choices for home buyers for several reasons, but if you have a FHA insured loan or plan to use FHA to purchase your new home in Texas, it’s important to know how to cancel and get rid of the mortgage insurance (MIP).

  • FHA Loans Typically Have Lower Rates
  • FHA Loans Are more forgiving with credit history and can be approved with lower credit scores in many cases
  • FHA Allows for Low Down Payment of only 3.5%
  • FHA Refinances can often be done without an appraisal

However, FHA loans work differently than other types of loans.  The Federal Housing Administration doesn’t purchase loans like Fannie Mae and Freddie Mac, but they rather insure the loans against default and set the guidelines for such insurable and approve-able loans.   FHA insures their loan by charging an Up Front Mortgage Insurance Premium (UFMIP) that is typically included into the loan amount, and their is an annual Mortgage Insurance Premium that is paid monthly.  Over the last year years, FHA has changed the costs of both, and currently it’s a very cumbersome expense for new home buyers or homeowners that have bought in recent years.  See the chart below for the history.

EFFECTIVE DATE DOWNPAYMENT UPFRONT MIP ANNUAL MIP
Prior to 7/14/2008 1.5% .50%
7/14/2008 <= 5% 2.25% .55%
> 5% 1.25%-2.25%* .50%-.55%*
4/5/2010 <= 5% 2.25% .55%
> 5% 2.25% .50%
10/4/2010 <= 5% 1% .90%
> 5% 1% .85%
4/18/2011 <= 5% 1% 1.15%
> 5% 1% 1.10%
4/9/2012 <= 5% 1.75% 1.25% / 1.50% for jumbo
> 5% 1.75% 1.20% / 1.45% for jumbo
4/1/2013 <= 5% 1.75% 1.35% / 1.55% for jumbo
> 5% 1.75% 1.30% / 1.50% for jumbo

In addition to the increase, the time frame for how long the Monthly Mortgage Insurance portion of the payment will stay with the loans has changed.  In June of 2013, FHA made the Monthly Mortgage Insurance for borrowers that put down less than 10% to remain with the loan for the entire life of the loan.  OUCH, that hurts!!  So, this effectively makes that low interest rate turn the overall payment similar to a rate that’s approximately 2% higher than the actual note rate when you blend it together with the principle and interest….

SO….HOW DO YOU GET RID OF THE FHA MORTGAGE INSURANCE?

First Step…Call 214-929-1733 or email josh@joshcampbellmortgage.com

The GOOD NEWS is that FHA Mortgage Insurance doesn’t have to be permanent.  You can qualify to get rid of the mortgage insurance several ways:

  1. FHA Mortgage Insurance Exception
  2. FHA Mortgage Insurance Ages Off By Paying Down the Loan Balance Over time
  3. Refinance out of the FHA Loan into a loan without mortgage insurance or a type of insurance that will go away

DO I QUALIFY FOR AN EXCEPTION?

Several years ago, FHA implemented a policy for long time FHA homeowners that have FHA loans endorsed prior to May 30, 2009, to get refinance for very cheap.  Instead of the new up front mortgage insurance premium of 1.75%, they can take advantage of an .01% up front fee (basically only $10 for each $100,000 financed).

And it gets better, the monthly mortgage insurance can drop from 1.55% to a max of .55% grandfathered in regardless of loan term or LTV.

To find out if you qualify, CALL our office 214-929-1733 or Email Josh@joshcampbellmortgage.com today

When will I be eligible to eliminate my FHA Mortgage Insurance?

For home owners that have FHA loan that pre-dates June of 2013, the FHA mortgage insurance will eventually go away on it’s own when you meet the requirements of having met the minimum amount of time (5 years of payments) and you reach 78% of the last know FHA appraised value.  Many folks misunderstand this rule and think that it’s subject to current market reaching 78%, but it’s usually based on when the house was purchased last because that’s normally the last time an FHA appraisal was completed.

  • 30-year loan term : Annual MIP is automatically canceled once the loan reaches 78% loan-to-value and annual MIP has been paid for at least 60 months.
  • 15-year loan term : Annual MIP is automatically canceled once the loan reaches 78% loan-to-value. There is no requirement for MIP to be paid for at least 60 months.

For a quick example, on a 30 year loan, you would normally pay the loan down to this 78% mark in about 11 years.  On a 15 year loan, it could reach 78% much faster – generally just over 2 years because you’re paying much more principle to the balance each month on the shorter term.

BUT, I WANT TO GET RID OF MY FHA MORTGAGE INSURANCE FASTER – HOW CAN I DO THIS??  

Again, first step is to call our office at 214-929-1733 or email josh@joshcampbellmortgage.com for more information!

The good news is that home values in Dallas Fort Worth have been increasing since 2011, so you probably have more equity if you bought the house in the last few years.  Many North Texans are refinancing out of FHA into a Conventional loan with cheaper mortgage insurance that is easier to get rid of and has more options including a single premium or even a lender paid mortgage insurance premium.  With as little as 5% equity, we can look at conventional loan options and improve your payment within a few short weeks.

IF your ultimate objective is to get a LOWER payment on a loan that performs better, call us today at 214-929-1733 or josh@joshcampbellmortgage.com and our team will help you understand all the options and get you out of your FHA Mortgage insurance premium.  

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