How to Avoid Permanent FHA Mortgage Insurance

by on 3.18.13 in Home Mortgage News

How to Avoid FHA Mortgage InsuranceOn April 1st, FHA annual mortgage insurance increases again making mortgage payments of first time and low down payment home buyers a little more expensive.

On June 3rd, 2013, FHA annual mortgage insurance will remain for the entire term of the loan for all 30 year fixed rate mortgages with a loan to value over 90%.

Here is the complete breakdown of the new MIP changes based on loan term and loan to value:

Term LTV (%) Previous New
<15 yrs <78 5 years 11 years
<15 yrs >78 – 90 Cancelled at 78% LTV 11 years
<15 yrs >90 Cancelled at 78% LTV Loan term
>15 yrs <78 5 years 11 years
>15 yrs >78 – 90 Cancelled at 78% LTV & 5 yrs 11 years
>15 yrs >90 Cancelled at 78% LTV & 5 yrs Loan term

FHA is Not the Only Option

Conventional financing is in many ways a much better option for home buyers or home owners with a high loan to value.  Did you know that conventional financing offers these options?

Purchase a home with as little as 3% down payment – If you are buying a primary residence, conventional financing allows for as little as 3% down payment using Private Mortgage Insurance, which will save you thousands of dollars in closing costs and monthly payments.  There is a pretty significant drop in costs if you can scrape up another 2% down for a loan to value of 95%, be sure to ask your loan officer for a comparison.

Refinance a home up to 97% loan to value – Conventional loans allow homeowners to refinance an owner occupied home up to 97% loan to value.  Same program as a 3% down payment purchase.

Lender paid mortgage insurance – Conventional programs also allow the lender to pay the mortgage insurance for a borrower.  This results in a slightly higher interest rate so do the math.  This is a fantastic option for those buyers or owners that want to convert mortgage insurance into tax deductible mortgage interest!

Community Access – This program offers significantly reduced mortgage insurance rates, 3% down payment (or loan to value on refinance) and reduced closing costs.  The catch is, there is an income limit of 140% of the area median income for where you buy.  These limits are very generous and I rarely see this being an issue.

Additional Reading

Click Here >> For more information about Mortgage Insurance Alternatives

Click Here >> For more information about BMC Community Access program


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