Financing in Orange>Question Details

CPbronco, Home Buyer in Orange, CA

Should I refinance and convert my FHA loan to conventional so I can get rid of MIP (PMI)?

Asked by CPbronco, Orange, CA Thu Mar 7, 2013

I purchased last September for 360k, under an FHA loan. i know I am paying MIP, but what I didn't realize is that unlike PMI, I must pay it for a total of 5 years. I am wondering if it is convenient for me to refinance to a conventional loan so I can get rid of the PMI sooner? Would I have to pay the PMI for a total of 2 new years or as soon as the equity goes up 20%? I am doing some major remodeling and with the market slowly rising I am hoping I'll be at that 20% mark. My interest rate is 3.5%

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Gregorio Denny’s answer
"Just curious. How is this being considered an investment property if I will continue to live in it?
Someone mention if I refi to conventional I would have to live in it for for 12 months. Is this 12 months from when I purchased or when I refi?
My remodeling has barely started so if I refi it won't be for a while."
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It's all about "intent." It sounds as if you intend to remodel, refinance then move. If this is the case you will need to refinance as an investment property. You will have to owner occupy for 12 months after the refi if you do so as owner occupied. If you plan on staying 12 months after the refinance then you have no issues with refinancing as owner occupied. Please note that when you go to buy a new property, if you have refinanced your current one within the 12 months you will run into issues.
1 vote Thank Flag Link Fri Mar 8, 2013
"And - I am not a mortgage lender , so to those here who are please correct me if I am wrong, but some here have implied the poster should run and refinance because of the "new FHA rules/changes" coming in June....just to clarify for anyone reading this.......don't they just apply to NEW Loans, not existing ones???

The poster won't be affected by the new "MIP for life of the loan rule", will she?"
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Correct Debra, the FHA changes are 100% irrelevant to this conversation because they already have one and are asking about refinancing to a conventional. I'm confused why it was brought up but I often get confused reading responses here. :)
1 vote Thank Flag Link Thu Mar 7, 2013
Thierry - scroll down and you will see where the poster states it is a duplex - "

'I'm planning on finishing my remodel by summer time. This is a duplex and currently have a renter. I plan to rent the unit I am currently living in, and not sell it. I am hoping to find another duplex to buy..."

I find it's always helpful to read, or at least glance through a few of the previous posts before jumping in with an answer so that you get the full picture.

And - I am not a mortgage lender , so to those here who are please correct me if I am wrong, but some here have implied the poster should run and refinance because of the "new FHA rules/changes" coming in June....just to clarify for anyone reading this.......don't they just apply to NEW Loans, not existing ones???

The poster won't be affected by the new "MIP for life of the loan rule", will she?
1 vote Thank Flag Link Thu Mar 7, 2013
Thierry asks:
"Never got the fact that it was a "2 Unit investment Property" in the question...Where was that mentioned? "
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I find that reading previous responses is a lost art on Trulia. It's really a shame too, it would cut down on 90% of the duplicate answers just posted for SPAM effect.

"This is a duplex and currently have a renter. I plan to rent the unit I am currently living in, and not sell it."
1 vote Thank Flag Link Thu Mar 7, 2013
read your response just as I posted mine! GMTA!
Flag Thu Mar 7, 2013
What you need to do is go over the math, and ask these questions:

1. How much will it cost to refinance.
2. How much will you save per month.

Then divide the cost by the amount saved to see how soon you break even . Keep in mind and account for the fact that you are re-amortizing the loan back out 30 years, so you can not assume the amount the payment is going down is what you are saving.

If you wish to contact me I will go over the math on that, there will be no cost or obligation. Just click on my picture to contact.
0 votes Thank Flag Link Mon Apr 15, 2013
Yes you should seriously consider refinancing now.
We have programs that require a little as little as 10% equity and would have no longer PMI (no borrower or lender paid MI = NO MORTGAGE INSURANCE)...
If you keep your current loan you will have to pay the MI for 5 yrs minimum (no matter how much equity you think has already built up).
How soon will the "major" remodeling be completed?
Rate on a new 30 yr conventional should be about the same rate as you have now.

Feel free to contact me if we can assist
0 votes Thank Flag Link Sun Apr 14, 2013
Yes you can refinance to conventional financing with a minimum 620 with 75% LTV or minimum 660 with 80% LTV. It only takes a few dozen questions to qualify you in minutes. I specialize in Under 640 Fico Score Loans and offer credit repair at no cost to raise fico scores to qualify. Here are some links to study and consider.

http://www.under640ficoscoreloans.com/Pages/Refinance.aspx

http://www.under640ficoscoreloans.com/Pages/ContactSheryl.aspx
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
REO & Short Sale Specialist
Credit Repair At No Cost
ALL Loan Programs Available
20+ Years Experience
DRE# 01140252
NMLS# 297251
760-486-4225
9am till 9pm 7 days
http://youtu.be/MrygA2_8fAY
0 votes Thank Flag Link Sun Apr 14, 2013
This is just a question of math. You have to ask what will it cost to refinance and how much will you save.
Remember though, that on existing FHA loans the MIP drops off once you get to 78% and 5 years. Also FHA usually have lower rates so refinancing may be good over the short run and expensive over the long run.

There are new changes to the MIP coming in June, but you should be grandfathered into the existing rules when you got the mortgage.
0 votes Thank Flag Link Fri Mar 8, 2013
I would call several lenders not just the banks but the mortgage brokers and get an answer from them as they would be the one lending to you. Each lender works with different kinds institutions who lends out the money
This is your best bet
Try calling these brokers to see how they can help you out and see what each of them says

Matt Frey - 949-632-5682
Ryan Easley 1-888-866-1312 x 6363
Jeff Coley - 949-922-7063
Dave Balsz- 949-939-2907

Let them know I referred you please
These brokers should be able to help you. Good luck

Ingrid Ski Realtor
949-874-0432
OCAreaHomes@gmail.com
0 votes Thank Flag Link Fri Mar 8, 2013
Just curious. How is this being considered an investment property if I will continue to live in it?

Someone mention if I refi to conventional I would have to live in it for for 12 months. Is this 12 months from when I purchased or when I refi?

My remodeling has barely started so if I refi it won't be for a while.
0 votes Thank Flag Link Fri Mar 8, 2013
lol me too!..........thanks for the clarification...I thought I had it right...but it's always good to check!
0 votes Thank Flag Link Thu Mar 7, 2013
Never got the fact that it was a "2 Unit investment Property" in the question...Where was that mentioned?

Should I refinance and convert my FHA loan to conventional so I can get rid of MIP (PMI)?
I purchased last September for 360k, under an FHA loan. i know I am paying MIP, but what I didn't realize is that unlike PMI, I must pay it for a total of 5 years. I am wondering if it is convenient for me to refinance to a conventional loan so I can get rid of the PMI sooner? Would I have to pay the PMI for a total of 2 new years or as soon as the equity goes up 20%? I am doing some major remodeling and with the market slowly rising I am hoping I'll be at that 20% mark. My interest rate is 3.5%
0 votes Thank Flag Link Thu Mar 7, 2013
Hello CPbronco,

I will assume you figured out from the responses that if you can you should before the new changes take effect. Contact a lender/mortgage Broker soon so you can see what you may need to do to qualify if you don't already.

Good luck,

Brian Wilson, Realtor
DRE #01321478
949-933-0852
0 votes Thank Flag Link Thu Mar 7, 2013
Mr Abel,

Would you mind sharing where you have 90% financing for a 2 unit investment property with no MI and 95% no MI?

Sounds awesome, please share.
0 votes Thank Flag Link Thu Mar 7, 2013
Here we go....This is Dynamite;

Conventional
We will go to 90% Loan-To-Value (only 10% equity in your property) NO MORE MORTGAGE INSURANCE...720 credit score minimum and 41% Max debt-to-income ratio, NO NORE IMPOUNDS (You will pay property taxes and Home Owner insurance on your own from then on)... if you qualified previously for that FHA loan including MI, you should be fine with a lower ratio, of 41%, and no more MI

We have another program where;
We will go to 95% Loan-to-Value (only 5% equity in your property) NO MORE MI. ONE SINGLE LOAN. 620 minimum credit score required, No reserves required, debt ratio 44% max
BUT FOR THAT ONE..YOUR INCOME CANNOT EXCEED 120% OF YOUR COUNTY MEDIAN FAMILY INCOME LIMIT ...(in Orange county YOUR INCOME NEEDS TO BE LOWER THAN $100,920 / YEAR
0 votes Thank Flag Link Thu Mar 7, 2013
Hello CP bronco;
I don't want to repeat what Grant told you. But please pay attention to what he advised you. He is right. As of this summer the FHA MIP will stay with your loan for life of the loan. I also think that you should not count on 20% increase in one year. I certaintly dont think you have gained 22% value in this short time even with major remodeling. So to answer your question, you are good now. Stay put. Visit this matter again next year.
Good Luck
Shadi Kian
Broker
DeltaMax Mortgage/Realty
NMLS 248451
0 votes Thank Flag Link Thu Mar 7, 2013
Refinance your mortage ASAP to get rid of PMI save you a lot. Rate are still very low.
0 votes Thank Flag Link Thu Mar 7, 2013
A few things you need to know.

If you are planning on renting it, you need to refinance it as an investment property if you don't plan on occupying for 12 months after the refi. Refinancing a duplex as an investment property will require 25% equity, not 20%. Your rate will also most likely go up from the 3.5% (based on current trends) but you would lose the MI so there would be an overall savings.

Have a competent loan officer do a comparison for you between keeping the FHA for 5 years versus a refinance and see what works best.
Web Reference: http://WeFixRates.Com
0 votes Thank Flag Link Thu Mar 7, 2013
The best way to explore this is to sit down with a reputable lender in your community and do the numbers!!!
0 votes Thank Flag Link Thu Mar 7, 2013
I'm planning on finishing my remodel by summer time. This is a duplex and currently have a renter. I plan to rent the unit I am currently living in, and not sell it. I am hoping to find another duplex to buy. But I really would like to get rid of the mortgage insurance as soon as possible. Just need to see how to do it the best, most cost effective way. And I am mostly planning on rising the value from upgrades I have done.
0 votes Thank Flag Link Thu Mar 7, 2013
CPBronco:

With FHA - You have to wait 5 years + 78% Loan to Value. You've already paid the upfront MIP, now you have to wait another 4.5 years to get rid of the monthly MIP. You're lucky - FHA is sticking it to borrowers effective June 1,2013 - MIP stays for term of loan.

If you refinance conventional - you will need an appraisal that comes to 80% Loan to Value - Otherwise, you will also pay Private Mortgage Insurance. - Private Mortgage Insurance on a conventional loan is typically less then FHA MIP. To answer your question - If you can get 80% loan to value in the next year it might payoff to refinance into a conventional. If you banking on 20% increase due to market conditions - I'm not that confident we'll see those returns. Also - Food for thought - a lender will not lend on a house during a remodel.

You also might be holding a gem you don't know about on FHA loans. FHA loans are assumable. So if you go to sell your house in 7? 8? or 10years - Not only will you benifit from appreciation but your selling a 3.5% interest rate. Your selling money! Where wiill interest rates be in 10 years? 7% - 8% 12%???? You could get a premium for your house!

Any questions - feel free to call me.

Grant Fawcett
Mortgage Banker
Castle & Cooke Mortgage
Cell: (949)212-4578
NMLS #832635
0 votes Thank Flag Link Thu Mar 7, 2013
Your mortgage payments might actually go up BUT again you will be getting rid of the Mortgage Insurance (that is big)....And you will now pay your property taxes and home owner insurance on your own............REFINANCE AND DO IT QUICK

Cheers

Thierry

Thierry Abel
Senior Loan Consultant
All California Mortgage
A Division of APMC
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
E: tabel@allcalifornia.com
NMLS 304353 - DRE 01380701
0 votes Thank Flag Link Thu Mar 7, 2013
You just need a minimum of 10% equity to refinance and get rid of your PMI.

Thierry

Thierry Abel
Senior Loan Consultant
All California Mortgage
A Division of APMC
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
E: tabel@allcalifornia.com
NMLS 304353 - DRE 01380701
0 votes Thank Flag Link Thu Mar 7, 2013
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