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Private mortgage insurance reduction

Discussion in 'BBS Hangout' started by xcamm1, Jan 15, 2015.

  1. xcamm1

    xcamm1 Member

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    Has anyone figured out if this only applies to new applicants or to all who currently carry PMI on their mortgage?

    Thanks Obama!
     
  2. pugsly8422

    pugsly8422 Contributing Member

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    I believe it is only for first time home buyers.

    I know there is an option that most don't know about called LPMI that anyone can take advantage of. This is the route we chose to go. Basically you pay a much lower amount for your PMI, but it is paid for the life of the loan. This is good if you plan on paying the mortgage in advance. When I did the math of PMI vs LPMI, I concluded it would take 16 years before the PMI route would be the cheaper way to go. Even if we don't have the home paid off by then, the money saved now is worth more than the money saved later, so that, as well as possible interest earned on the money saved now, has to be taken into account. Hopefully this is what you're referring to, if not, then hopefully someone will learn something :)
     
  3. rage

    rage Member

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    LPMI is a Lender Paid PMI. The lender most likely charges you higher interest rate to make up for it.
     
  4. Cranberry_Juice

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    Obama doth giveth and secretly taketh away.
     
  5. Space Ghost

    Space Ghost Contributing Member

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    Interesting. Im a little disappointed I am reading about this on a forum instead of hearing from my mortgage broker first.

    (typically)
    Conventional loan: 80% down, no PMI

    FHA: 3% down, 1.35% PMI - PMI is paid until loan reaches 80%

    USDA: (limited availability) 0% down, .4% PMI for the life time of the loan

    The FHA is looking to lower the PMI down from 1.35% to .85%. This helps me a lot. I was debating between USDA, FDA or Conventional. If I went conventional, I would have to pull from retirement, however it would be worth it as I could pay back my retirement instead of paying PMI.
    I really did not want to pay PMI for the lifetime of the loan with USDA, however I could refinance later if I wanted.
    FHA PMI was simply too high and it would take me 10 years of the 30 year loan to get below 80%. At 1.35% over 10 years, that is quite a chunk of money i'd give away. Now that its dropping to .85%, it makes it much more attractive to use FHA.
     
  6. pugsly8422

    pugsly8422 Contributing Member

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    Honestly, we could have put down 30+%, but I chose to put down only 5% because I feel I can make more than 3.25%+the cost of the LPMI by investing the money. Maybe that's a better option.
     
  7. BigSherv

    BigSherv Contributing Member

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    I had to pay it on second home even with very high credit score. Was told if we are not putting 20% it is required by everyone. We opted to rent our original house instead of rolling it into next house.

    You can refinance if the rates goes down and see if you now have 20% of appraised value paid off.

    I think my example is right but you may want a mortgage guy to verify/

    You buy a house for 100K. Pay 5% off so you still owe PMI until the note hits 80K which is 80% of appraised value.

    Your do a refinance and and the apprised value is 115K. You have 5K paid off of he original 100K loan. So you have 95K towards an 115K appraised house. So you are at roughly 82.5%. So if you fork over a little bit more you can be free of PMI forver!



    Sometimes the house may appriase for 10-20K more just a year from when you bought it. That plus what you already have in paid down the note may cover it. Also, if you get a nice appraiser you can sometimes tell the appraiser he is there for a refinance and you need it to be a certain amount. Say 350K. If he does his work and he is at 347K, he may be a nice guy and do 350. Somehow let him know. But don't ask him or try to bribe him or have a sob story. Some appraisers think the owner wants the price low so that their initial tax bill will be low.

    You can do what the other poster mentioned with the life of the loan PMI but with the way houses increase in value and the fact you likely will make more money as you get older you may be able to pay 20% off sooner decreasing how much you pay in PMI in total. The other way it is rolled into the note for good. No way out of it.

    I hate PMI. It should go into a fund and if you payoff your house or sell it without defaulting on a payment you should get it back.
     
  8. paulnhbtx

    paulnhbtx Member

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    PUT DOWN 20% and PMI does not apply. That's what I did.
     
  9. Space Ghost

    Space Ghost Contributing Member

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    I speak for my case only. I have very aggressive goals. My intention is to have the house paid off in 10 years or less.

    The circumstances differ for everyone, such as if they plan on paying the min. monthly for 30 years or if its a short term buy, ect ...
     
  10. juicystream

    juicystream Contributing Member

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    PMI is paid over the life of the loan on FHA loans. They changed it in 2013. You have to re-finance to non-FHA or re-finance with an FHA loan after making improvements to your home that being you up to 20% equity.
     
  11. Space Ghost

    Space Ghost Contributing Member

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    (P)MI is required on all new purchases if 20% or more isn't put down, regardless of credit. Additionally, PMI is based on the loan amount, not the value of the house. Your house could double in value next year and you would still be required to pay the PMI. It takes about 33% of the lifetime of the loan making min. payments before you get below 80%. On a 30 year loan, you would pay PMI for 10 years at min. monthly payments (USDA is lifetime of the loan).

    I am not sure how refinance works, but I suspect the rules apply the same.
     
  12. tmacfor35

    tmacfor35 Contributing Member

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    FHA will go from 1.35 to .85

    It will basically dip the FHA payment from 65-100 dollars depending on total PMI obviously.

    This is for new buyers.

    Obama actually did a solid here.
     
  13. juicystream

    juicystream Contributing Member

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    I really appreciate being in the small group that are paying 1.35 over the life of their loan. What a solid for me.

    I bought my first house in 2007, 4 months before they started First-Time Homebuyer Programs.

    The government hates me.
     
  14. Space Ghost

    Space Ghost Contributing Member

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    You are not paying for the lifetime of the loan, only up to 80%. Lifetime is USDA and its at .4%
     
  15. juicystream

    juicystream Contributing Member

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    Not anymore

    "Worst of all is that you now have to pay the annual FHA premium for the life of your loan. Before June 3, 2013, you were able to -- in most cases -- cancel your mortgage insurance premium after five to 10 years."

    http://www.hsh.com/finance/mortgage/fha-loans-2014.html
     
  16. Space Ghost

    Space Ghost Contributing Member

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    I am learning more and more. Here is a good read.

    http://www.fha.com/fha_requirements_mortgage_insurance

    There is a difference between MIP and PMI. I wonder if underwriters provide PMI instead of MIP on FDA loans? I will have to corner my mortgage broker. It might be time to find a new one.
     
  17. Phillyrocket

    Phillyrocket Member

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    Juicystream is right, we bought right before the rule change at the 1.35% but it's only for the first 5 years.

    People think they are getting a deal since it's being reduced but it used to be much much better.
     
  18. juicystream

    juicystream Contributing Member

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    My understanding is MIP is paid to the FHA while PMI is paid to a private lender, but other than that are basically the same.

    I'm arguably already at 20% equity, so I hope to refinance as soon as my wife starts her RN job.
     
  19. juicystream

    juicystream Contributing Member

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    That is why they are dropping the rate. I think it will help people stay with their FHA loan instead of refinancing.
     

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