January 18th, 2014 6:41 AM by Nathan Rufty
How to get rid of FHA Mortgage Insurance to lower my mortgage payment?
If you purchased a home utilizing the 30 year fix FHA home loan program, you have monthly mortgage insurance that is attached to your mortgage payment. The best and quickest way to remove mortgage insurance is to refinance out of the FHA loan and into a Conventional loan. With the home value increases we have seen over the past 6 months, this is the perfect time to contact a direct lender to explore your financing options since you may have the equity in your home to finance your current FHA loan into another loan type.
What is FHA Mortgage Insurance?
FHA mortgage insurance provides lenders with protection against losses as the result of a homeowner defaulting on their FHA mortgage loan. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner’s default.
HUD has updated it’s requirements on all loan FHA loan terms for 15 and 30 years. Which means if you put less than 10% as a down payment when purchasing a home on a 30 year fix program, you will have mortgage insurance through out the 30 years. See chart below on the changes that took effect June 3rd 2013.
Using the FHA loan program to purchase a home does come with it’s benefits into homeownership, with a low down payment, lower credit score requirement, offers lower rate than Conventional program and less underwriting restrictions than Convetional, this is a great programs for a 1st time home buyer and buyers with limited funds to purchase a home.
After owning the home for 6 months and your equity had increased, that is to time to call me and we can see what the loan options are available to refinance you out of the FHA home loan program. Meaning you will need to qualify under the Conventional loan guidelines and have your home re-appraised.
This monthly mortgage insurance can be tax deducted (do consult your tax preparer for current deductions) if you meet the requirements and every year it is one of the tax benefits that is always on the chopping block. That is a reason to look into refinancing into a Conventional loan so you are not just throwing money away every month.
I welcome the opportunity to explore the avenues of available home loan programs to remove the monthly mortgage insurance that you currently have to lower your over mortgage payment. Let’s get started on saving you money and reduce your monthly mortgage obligation.