For FHA loans is it mandatory to pay PMI for 5 years even if the equity is over 20 percent of the loan value?

Asked by Ronline, 94086 Mon Aug 16, 2010

For FHA loans is it mandatory to pay PMI for 5 years even if the equity is over 20 percent of the loan value?

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Scott Sheldon, , Petaluma, CA
Sun Sep 12, 2010
Ron & Realtors,

See actual HUD Guidelines below- Hope this helps:)

FAQ : When can I stop paying my monthly FHA mortgage insurance premium?

Solution Details : Termination of the FHA monthly mortgage insurance premium (MIP) is based on several factors including: the loan term, loan-to-value (LTV) at loan origination and regulations in place when the loan is closed.

Generally, loans closed prior to January 1, 2001 will not be eligible for termination of MIP, which is collected as part of your monthly mortgage payment.

For loans closed on or after January 1, 2001, FHA's MIP will be automatically terminated under the following conditions:

1. For mortgages with terms more than 15 years, the MIP will be terminated when the Loan to Value (LTV) ratio reaches 78%, provided the borrower has paid the MIP for at least five years. If the LTV reaches 78% and the borrower has not paid MIP for at least five years then the borrower must continue to pay MIP until the five year requirement is met.
2. For mortgages with terms 15 years and less and with LTV ratios of 90.01% and greater, the MIP will be terminated when the LTV ratio reaches 78%, irrespective of the length of time the borrower has paid the MIP.
3. Mortgages with terms 15 years and less and with LTV ratios of 90.00% and less will not be charged MIP.

For loans closed and insured under the Hope for Homeowners Program, the annual MIP is collected monthly for the life of the loan.

Note: The MIP cancellation provision excludes those loans not insured by the Mutual Mortgage Insurance (MMI) fund. Although the MIP will be terminated as described, the FHA insurance will remain in force for the loan's full term. This MIP termination provision only applies to loans where the borrower also paid an Up-front MIP at closing. FHA will determine when a borrower has reached the 78% LTV ratio based on the lesser of the sales price or appraised value at loan origination. For example, if the lesser of the sales price or the appraised value at origination was $100,000, when the loan amount reaches $78,000, HUD will no longer collect MIP on the loan.

FHA's regulations do not permit a borrower to submit a new appraisal to reach the threshold for termination of MIP. Termination of MIP will normally be based on the scheduled amortization of the loan. However, borrowers may reach the 78% threshold in advance of the scheduled amortization because of prepayments of loan principal.
A borrower whose loan reaches the 78% LTV threshold sooner than projected because of prepayment may have the MIP terminated (but not sooner than five years from loan closing for loans with terms greater than 15 years) if the borrower has not been more than 30 days delinquent in paying the mortgage payments during the previous 12 months.
The borrower must submit a termination request to the lender and the lender must provide the borrower's request and supporting documentation with respect to the mortgage payments during the last 12 months to FHA for such termination.
2 votes
, ,
Thu Sep 27, 2012
Good morning Ronline,

The FHA program calls it MIP: the Annual Mortgage Insurance Premium is collected in monthly installments. Borrowers must pay this premium for a minimum of 5 years and until 22% of principal of the original appraised value has been paid in to the loan. For a 15 year mortgage the 22% principal threshold is reached earlier than on longer term mortgages and may not have the MIP for the full five years. This premium is also known as MMIP for Monthly Mortgage Insurance Premium because it is paid in monthly installments.

PMI is Private Mortgage Insurance and is used on Conventional mortgage loans (FannieMae/FreddieMac) when a Borrower's down payment is less than 20%.

Trevor Curran
NMLS #40140
0 votes
Robert Chome…, , San Diego, CA
Wed Sep 26, 2012
Yes you have to have FHA MI for 5 years regardless of your equity. After 5 years if the loan balance is
0 votes
Robert Lei, Agent, Cupertino, CA
Mon Jul 30, 2012
Get your answer from an mortgage professional. Mortgage rules/regulations change so frequently that an agent dedicated to the real estate side should always refer you to his/her trusted mortgage professional. I can refer you to some excellent mortgage professionals that I've worked with.
0 votes
, ,
Tue Jul 24, 2012
Ronline: this question is so old! I hope you have been able to refinance this out of the FHA into a nice comfy conventional loan for yourself!
0 votes
Nanalori53, Home Owner, Port Charlotte, FL
Tue Jul 17, 2012
That's unfair. We're putting down 35% and FHA is charging me five years at $1400 a year!!! I"m only borrowing $81,000.
0 votes
Should have gone conventional with 35% down or opt for a lesser (maybe 25%) initial down payment with a 15 year FHA loan.
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Ruth and Per…, Agent, Los Gatos, CA
Sat Oct 2, 2010
Hi Ronline

Need more facts, generally you should not have to pay unless you signed up for a loan that is a Hope loan or prior to 2001.

Call your lender and it should all work out. Generally, if the loan is being serviced by a Bank
They have no motivation.

Good luck.
Web Reference:
0 votes
Scott Sheldon, , Petaluma, CA
Thu Sep 23, 2010

Get your info from the lender. Thats your best bet. I get paid to originate loans. This is my lifeblood. The article I posted earlier is exactly what you are looking for. As a Direct Endorsement Lender with HUD we have access to non-consumer guidelines such as what I posted. I sincerely hope this answers your questions. You can email me if thats easier MI is the cost of getting a HUD insured mortgages with 3.5% down.
0 votes
Gregorio Den…, , San Diego, CA
Sun Sep 12, 2010
Every single answer you received is incorrect. I, for the life of me have no idea why REALTORS insist on answering mortgage related questions.
Linda got the closest in her 2nd attempt. With an FHA loan you pay an up front fee currently still at 2.25% until October when it will be 1% unless pushed back again. The rest of her answer was correct.

Speak with a LOAN OFFICER to get accurate real estate finance information
Web Reference:  http://WeFixRates.Com
0 votes
Linda Lorenzo, Agent, McKinney, TX
Sun Sep 12, 2010
Here is a link for you that should help:
I apologize for saying earlier you couldn't cancel mortgage insurance, it is called MIP not PMI (but serves the same purpose, protecting the lender) the non-cancellation is true only for older loans. You do have to pay for 5 years regardless of the LTV (loan to value) but it will cancel automatically at 78%. The upfront fee is 1% not 1.5% as Missy stated(reduced from the previous 2.25%) and the annunal premium for a 95% loan is .90% (up from .55%) not 5% as Missy again stated. Please check with a lender they will be happy to discuss this with you.
0 votes
Ronline, Home Buyer, 94086
Sun Sep 12, 2010
Thanks for your responses. I was getting different answers everytime - so it would help to get some kind of confirmation from someone who knows this for sure.
0 votes
Missy, Home Owner, 04240
Sun Sep 12, 2010
You don't pay PMI on a FHA loan. It's a federal program not a private one. You do have to pay the 1.5% upfront fee. If you put less than 20% down then you also have a 5% mortgage insurance payment (basically the same as PMI, but it is not a private company). Mortgage insurance is cancelled after your loan reaches 78%.
I would think agents should be familiar with the program and able to correctly answer this question.
0 votes
Linda Lorenzo, Agent, McKinney, TX
Sat Sep 11, 2010
Worse than that I believe that on a FHA loan PMI is required for the entire term even if the loan to value ratio is below 80%. Hmmm wonder where all that surplus money is going.
0 votes
Grace Keng, Agent, Santa Clara, CA
Sat Sep 11, 2010
You need mortgage insurance if you don't put down 20% on your FHA purchase.
I don't know there is 5 years limit there.
You can read the following link to get more information:
Happy reading.

Grace Keng
Web Reference:
0 votes
Ronline, Home Buyer, 94086
Tue Aug 17, 2010
Experts please clarify - I am not finding this info on the HUD website. Thanks in advance
0 votes
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