Mortgage Loans

[leppy2]

Is there a certain amount of years before the PMI can be dropped from your mortgage? Or is it a percentage?

[custombusa]

i think its .4% per year so 100,000 would be 400 per year or $33 per month.  Im pretty sure it stays for the life of the loan but its .4% of the principal balance each year so it should come down a little bit each year

[MovingForward_2012]

Currently on FHA loans, the PMI drops off when your loan balance is 78% of the original appraised value and it is no sooner than after you make 60 payments. From what the other posted stated, it sounds like USDA is different? The FHA rules are changing within the next year to require PMI for the life of the loan. Those who close before the new laws take effect are grandfathered.

Leppy, when I signed my loan paperwork, there was a mortgage insurance disclosure form that I had to sign stating that I understood the timeframe that PMI was required on my loan. If your docs are in an online system, I would look over them to see if you signed something similar.

[Sunshine85]

USDA MI stays with for the life of the loan. The good thing is that the USDA MI is significantly less than FHA MI- given the proposed changes re: FHA MI staying for the life of the loan, it seems like going USDA will save you money in the long run.

[JM-AM]

FHA MIP has to be paid a minimum of 60 months as stated and every year the payment is also a little lower since it is based off the principal balance. Also it can be dropped after paying the required 60 months once the LTV reaches 78% of the original selling price or appraised value, whichever was lower at the time of purchase. It takes several more years of payments to reach the 78% LTV ratio if making just your required monthly payments.

USDA is cheaper, but as also mentioned it is for the life of the loan, and payments as stated also get lower as your principal balance becomes lower.

If you plan to just make the minimum payment required, in my opinion USDA is the better way to go.

[MovingForward_2012]

Interesting! So if I read correctly, each year the mortgage insurance is less as it is based on the current principal owed? If true, that makes me even more happy as I was unaware of that! :-)

[JM-AM]

Yes it decreases over time. It is all based on principal balance.

[MovingForward_2012]

Thank you. I thought it remained the same until the balance was at least 78% of the original value. That's good news!

[leppy2]

I agree movingforward (was going to shorten your name to MF, lol, but...). That is great news! Sadly, the annual fee for usda stays the life of the mortgage.

[MovingForward_2012]

Annual fee? What is that in relation to PITI (Principal, Interest, Taxes, and Insurance)? Is that an additional charge on top of the mortgage insurance or is it wrapped into the total paid per month for mortgage insurance?