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PMI Sucks.

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Anonymous
Not applicable

Re: PMI Sucks.

I had no idea about such a thing as a MIP. I need to figure this out now. Here's a hypothetical (though likely for us later) scenario. We buy a home for $100K:
 
using an FHA loan - $3000 down, principal of $97,000, payment of $521/mo. MIP of 1.5% = $1500 > $125/mo. PMI of .51% (.50% plus .01% to make it refundable) = $510 > $42.50/mo. Total monthly payment by choosing an FHA loan with 3% down = $688.50 OR *is it a flat fee of $1500 at closing? That would bring the monthly payment down to $563.50. We'd still have to fork over $1500 at closing for the priviledge though. I'd rather that go to our principal.
 
using a convential 5% loan - $5000 down, principal of $95,000, payment of $510/mo. NO MIP. PMI of .55% (.54% plus .01% to make it refundable) = $550 > $45.83/mo. Total monthly payment by choosing a conventional 5% loan with 5% down = $555.83
 
Now that I look at this, it seems like a no brainer to choose a conventional loan. I could either choose FHA and throw away $1500 at closing or choose the 5% and spend $500 more and have it go towards our principal. Is this correct?


Message Edited by reformedfamilyman on 02-05-2008 03:59 PM

Message Edited by reformedfamilyman on 02-05-2008 04:12 PM
Message 31 of 35
ShanetheMortgageMan
Super Contributor

Re: PMI Sucks.



HinH wrote:
My PMI is around $600/month on a 290,000 30yr mortgage. My question is this: my FICO score has gone up and my lender told me it (the hihg PMI) was based a lot on your FICO, since mine has gone up, do I call CITI mortgage and ask to adjust? OR am I SOL until I reach 680 to refi with a no PMI program (what I was told).

Thanks!

That is correct. PMI on conventional loans is based on your FICO score.  Since your score is quite a bit higher now, I would contact your MI company to see if they can adjust your PMI to a lower amount.  It's not guaranteed, but it's worth a shot.  If you don't know who your MI company is, call up CitiMortgage and inquire.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 32 of 35
ShanetheMortgageMan
Super Contributor

Re: PMI Sucks.



reformedfamilyman wrote:
I had no idea about such a thing as a MIP. I need to figure this out now. Here's a hypothetical (though likely for us later) scenario. We buy a home for $100K:
 
using an FHA loan - $3000 down, principal of $97,000, payment of $521/mo. MIP of 1.5% = $1500 > $125/mo. PMI of .51% (.50% plus .01% to make it refundable) = $510 > $42.50/mo. Total monthly payment by choosing an FHA loan with 3% down = $688.50 OR *is it a flat fee of $1500 at closing? That would bring the monthly payment down to $563.50. We'd still have to fork over $1500 at closing for the priviledge though. I'd rather that go to our principal.
 
using a convential 5% loan - $5000 down, principal of $95,000, payment of $510/mo. NO MIP. PMI of .55% (.54% plus .01% to make it refundable) = $550 > $45.83/mo. Total monthly payment by choosing a conventional 5% loan with 5% down = $555.83
 
Now that I look at this, it seems like a no brainer to choose a conventional loan. I could either choose FHA and throw away $1500 at closing or choose the 5% and spend $500 more and have it go towards our principal. Is this correct?

The 1.5% MIP charged on FHA loans is actually financed into the loan amount, and it's a one time fee, not an annual fee.  So say your loan amount was $95k before the MIP, it would be $96,425 ($95k + 1.5% of $95k which is $1,425) with the MIP included.  You can always elect to pay the MIP out of pocket as well, but it's a neat feature that FHA has to include it into the loan amount.  On FHA there is monthly PMI as well (unless your LTV is below 90% and you are taking a loan term of 15 years or less), equivalent to .5% per year, or ~.0416% per month.
 
On your FHA example, using a 6% interest rate (never know where rates will be in the future), on the $97k base loan amount ($98,455 with MIP included) your payment would be $590.29/mo for the principal & interest.  Then the monthly PMI would be $41.02 (.5% of amount financed), bringing that portion of the payment to $631.31.  Still would have to include property taxes & homeowners insurance on a monthly basis as well.  The down payment would still be 3%, as increasing the loan amount to include the MIP doesn't reduce your down payment amount, it just reduces the funds required to bring in to close on the mortgage.

Your your conventional loan example, using a 6% interest rate, on $95k, principal & interest payment would be $569.57/mo.  PMI on conventional financing is score sensitive (as you can read from the previous posters scenario above yours), but let's say you qualified for the best mortgage insurance rate (which would be .78% coverage), your PMI would be $61.75/mo... totalling $631.32.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 33 of 35
Anonymous
Not applicable

Re: PMI Sucks.

What about Suzy Orman's advice about paying PMI upfront or tacking it on the back of your loan so that the amount then becomes tax deductable?
Message 34 of 35
ShanetheMortgageMan
Super Contributor

Re: PMI Sucks.



cnscronce wrote:
What about Suzy Orman's advice about paying PMI upfront or tacking it on the back of your loan so that the amount then becomes tax deductable?

If FICO scores are strong enough you can buy out the monthly PMI by either paying an upfront fee at closing, or taking a slightly higher interest rate.  Conventional has that option, FHA does not.  PMI is tax deductible under certain circumstances.
 
Some borrowers may be able to deduct mortgage insurance premiums paid on mortgages taken out or refinanced during 2007. A borrower who prepays premiums for later years may deduct only the premiums that relate to 2007, except for prepayments for guarantees made by the Department of Veterans Affairs or the Rural Housing Service. Only mortgage insurance contracts issued during 2007, 2008, 2009 or 2010 qualify for this new itemized deduction. Proceeds of the mortgage, secured by a first or second home, must be used exclusively to buy, build or improve these homes, or alternatively, to refinance a mortgage, secured by the home and used for these purposes. Home-equity loans used for other purposes are not eligible. The deduction for mortgage insurance premiums is phased out for taxpayers with adjusted gross incomes exceeding $100,000 ($50,000, if married filing separately). Claim this deduction on Schedule A, Line 13. Further details are in Publication 936.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 35 of 35
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