Do we have to put up a year's worth of mortgage insurance payments at closing or is there a way around that?

Asked by jennifer, Renton, WA Sun Feb 10, 2013

My husband has applied for an FHA loan, because he is only putting down 3.5 percent he is required to get mortgage insurance for five years. We were going over his papers and there was a $5000 charge in the closing costs for mortgage insurance. We already have the minimum for a downpayment, if we could afford to pay another $5000 we wouldn't need the mortgage insurance. Is there anyway around this or are we going to have to come up with this money to close?

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Mon Feb 11, 2013
You better hurry and close! As covered below, FHA's MMI (monthly mortgage insurance) will no longer cut off after 60 months, or previously at 78%. As far as the upfront MIP (mortgage insurance premium), paying it upfront is cash will make NO difference, you will still have MMI. Most borrowers just finance it into their loan. If you didn't want to have MMI, you should have done a Conventional Loan and buy out the PMI in cash or do it as Lender paid. Of course your Loan Officer should have gone over that with at the time of application.

Best of Luck!
Web Reference:  http://www.AFN-loans.com
0 votes
Karen Mcknig…, Agent, Kirkland, WA
Mon Feb 11, 2013
Hi Jennifer,

I think you can pay the mortgage insurance monthly if you choose, even though it may cost you more in the long run. My understanding is that FHA is going to require the mortgage insurance for the life of the loan soon, or is considering this option. Have your lender look into the 3% down conventional mortgage loans that are now available. The Mortgage Insurance may prove to be less expensive on the conventional loans.

If you want a great Mortgage Planner, I have several to whom I can refer you.

FHA is raising their rates to encourage more private lending to move back into the mortgage market.

Good luck,
Karen
Web Reference:  http://www.karenmcknight.com
0 votes
Kary Krismer, Agent, Renton, WA
Mon Feb 11, 2013
Jirius,

I believe it's MI rates which are going up in April. June is the date of the change to MI lasting the life of the loan.

http://seattletimes.com/html/homesrealestate/2020312287_hreh…
0 votes
Jirius Isaac, Agent, Kenmore, WA
Mon Feb 11, 2013
I need to point out that as of April this year, FHA mortgage insurance will no long expire when you have 78% equity in a property as John says below. It will go on forever!! The only way to avoid this is to get a conventional loan at 3.-5% down which might be possible depending on your situation. The monthly insurance premium would be lower as well. You should discuss this with your mortgage broker or if you need another opinion, feel free to contact me directly.

Good luck to you in any case,
Jirius Isaac
Isaac Real Estate Team
Champions Real Estate Services
TriStar Finance #MLO-107799
Office: 425-483-6849 Cell: 206-841-9976
Winner of Seattle Magazines 5 Star
Real Estate Agent Best in Client Satisfaction Award
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Web Reference:  http://tristarfinance.com
0 votes
Kary Krismer, Agent, Renton, WA
Mon Feb 11, 2013
Some good answers here. I'm just posting this to see future answers.
0 votes
Stacey Lange, Agent, Kirkland, WA
Mon Feb 11, 2013
I have a great loan officer with Wells Fargo, Jesse LaDue, and they have a loan program called the Community Development Mortgage Program and although I am unsure of ALL the details -- it is for low-moderate household income (I believe you have to earn 80% less than median household income -- which in King and Snohomish Median was $88,000 in 2012), has NO Private Mortgage Insurance and only requires 2% down!! You can use down payment assistance with this and are NOT required to be a first time buyer....there are a few other details and nuances to it, but in my opinion if you qualify -- wow! what a GREAT program and on top of it Jesse is an awesome lender:

https://www.wfhm.com/loans/jesse-ladue/about.page
0 votes
Dan Tabit, Agent, Issaquah, WA
Sun Feb 10, 2013
Jennifer,
One last thought, there are some HomePath properties out there that only require 3% down payment and do not charge for an appraisal or MI. These properties are limited and most lenders who do FHA can do the HomePath option too.
If you are buying in a rural area, like Fall City, Snoqualmie, North Bend or Carnation to name some options, you may also qualify for USDA, which is 0 down. There are income and location limitations, but these are good loans if you fit the criteria.
0 votes
Dan Tabit, Agent, Issaquah, WA
Sun Feb 10, 2013
Jennifer,
One popular option, if you haven't already made an offer for a house, is to request the seller pay some or all of this for you. It can work in lieu of another discount, to the seller it's the same as a price reduction.
0 votes
Ray Akers, Agent, Seattle, WA
Sun Feb 10, 2013
I wonder if you've explored all your options regarding a home loan? Did you choose the FHA mortgage because of the low down payment, or because your credit has some blemishes? You might want to talk to a mortgage broker to explore other options. Mortgage brokers typically have more loans from which to choose. If your credit is good, then you'll find there are more loan options. Good luck.
0 votes
Robert Merha…, Agent, Bellingham, WA
Sun Feb 10, 2013
FHA requirements for prepaid five years MI are due because of so many FHA foreclosed homes. Can you try a conventional mortgage and pay MI for the minimum period (reappraisal) once your equity increases....or is your credit rating such that FHA is the only optoon?
0 votes
I was going over the good faith estimate and it looks like the $5000 is financed. Does that mean it's included in the total loan amount? The reason we are going FHA is because we can only do 3.5% down.
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