@mkdelight wrote:
I was looking to refinance the mortgage to eliminate the mortgage insurance. Unfortunately, the appraisal came below 20%. The credit union is offering a FHA mortgage at a rate of 3.25%.
Current FHA mortgage at 5.375%
PRINCIPAL & INTEREST: $2,171.83
ESCROW: $746.75 (which includes mortgage insurance of $159.83 per month)
TOTAL MONTHLY PAYMENT: $2,918.58
Current balance is $348,000.00
Refinance
FHA mortgage at a rate of 3.25%.
PRINCIPAL & INTEREST $1,609.66
ESCROW: $795.37 (which includes mortgage insurance of $240.12 per month)
TOTAL MONTHLY PAYMENT: $2,405.03
Estimate closing cost and prepaid costs will be about $12,000. This is without the mortgage insurance premium of $6361.25.
I’m not sure this is the right move. Let me know what you think.
^^^when did you obtain your current mortgage (month and year)?
The reason I am asking is because the FHA mortgage insurance monthly premium can be dropped off your mortgage when you have equity of 20% or more if your loan was originated (and received a case #) prior to June 3, 2013. So you may not want to refi into another FHA mortgage if your mortgage was originated prior to MIP becoming permanent for the life of the loan. In other words, if you refi into a FHA loan now, the monthly MIP is permanent for the life of the loan at 85 basis points. If your current loan was originated prior to permanent MIP, it might be best to just leave it be until you can drop the MIP or refi into a conventional loan. The exception would be if you have more than 10% equity when you refi into a new FHA loan - then you can drop the MIP after 11 years. Speak to a knowledgeable LO.
The value of your home could be different from what the appraiser indicated. I work with appraisers all the time. If you have 10 appraisers come to your home to provide a professional report you could end up with 10 different values! Some appraisers are better than others. If you have an active neighborhood, as far as recent similar sales are concered, then it is easier for the appraiser to come up with a more accurate valuation. If your neighborhood is stable - with very few sales, then it is not unusual for appraisers to differ substantially in value.
Have you considered refinancing into a conventional loan? Have you considered refinancing with a mortgage banker rather than a CU? I love CU's but not for mortgages (as a general rule). Mortgage bankers have CU's beat by a mile in terms and rate IME.
