Home Loans California & Arizona

How Do I Get Rid of My FHA Monthly Mortgage Insurance?

May 17th, 2014 9:20 PM by Nathan Rufty

How to remove FHA mortgage insurance

Homebuyers who purchased a home after June 3rd 2013 and utilized the FHA home loan program to make that purchase, can bet that their monthly mortgage insurance will remain through the life of the loan. Image making that mortgage insurance payment for the next 30 years, just throwing money out the window if there is a way to get rid of that payment.

Here is what I mean, HUD implemented that the mortgage insurance will remain in the payment throughout the term of the loan. Any FHA case number issued after June 3rd 2013 and with a down payment of less than 10% will have mortgage insurance for the next 30 years. Without a doubt this is one of the better home loan programs to purchase a property, but now that you are in the home and have made 6 mortgage payments, it is time for you to refinance out of the FHA home loan program into a long term Conventional type financing for 15, 20 or 20 years.  

With the equity growth we have seen here in California over the past 12 months, your property's value probably has increased enough that you may have anywhere from 5% to 20%+ freed up equity to refinance out of the mortgage insurance payment. That is pretty much the only way to eliminate the FHA insurance is to refinance out of the program or sale your home that you just bought, which I am sure you do not want to do.

FHA is a great loan program to purchase a home if you have limited funds to put down or have a lower credit score. I promote the FHA home loan program because it works for a lot of home buyers, the one thing I advise my buyers once we close escrow on a home utilizing the FHA home loan is to start a plan to improve their over all financial picture to refinance into a Conventional loan after they have made their 6th mortgage payment.

It is not to late to improve your overall credit, because if you are at a 85%+ loan to value, the way you compensate the higher loan to value is with a higher credit score. If your credit score is over 700+ and your loan to value is 90%, yes you still have an option to refinance your loan that has mortgage insurance into a loan that does not.

Do not delay on exploring this option, because paying the mortgage insurance of, lets say $250 a month for 30 years that will equal to $90,000. Image what you can do with $90,000 another home, new car, awesome vacation, college for the kids or add extra to the mortgage payment each month to pay off sooner.

If you do not qualify for the conventional refinance now, I will advise what you need to do to put yourself in the position to be able to refinance. By all means you do not want to remain in this loan if you do not have to and there is an opportunity to refinance out. By waiting you may miss the value that your home may have now or miss out on the lower interest rates that we are experiencing today.

Start by calling me direct or emailing me and lets discuss your situation to see if there is an opportunity to start saving you money. I am not hear to push you into something that does not make financial sense, my goal is to present you with your options and guide you with a professional opinion on what is best for you and your family.


Posted in:General
Posted by Nathan Rufty on May 17th, 2014 9:20 PM

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