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Avoiding PMI with FHA

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Frequent Contributor

Avoiding PMI with FHA

Hi all

 

I am looking for loopholes to avoid PMI as the cost would put me over where I would like my monthly mortgage. Unfortunately my income is only at 25k and my scores are now in the mid 600's. Fortunately I have a 10% down payment and I am a first time home buyer with no debt except for revolving CC's with under 20% utilization and monthly payment average is only 25$. I am looking for a house in the 120's if possible but I do not want my monthly payment to be over $700... I would really like it in the $500 dollar range but that appears impossible so I guess I have to keep throwing my money away on rent!


Starting Score: 530 (EQ) 03-2012
Current Score: 678 (TU) myFico 04-2013, 649 (EQ myFico
Goal Score: 720+

Wallet: Wells Fargo Secured- 400 CL, Capital One Secured- 250 CL, Credit One Unsecured- 300 CL
Message 1 of 17
16 REPLIES 16
Valued Contributor

Re: Avoiding PMI with FHA

You a conventional loan and 20% down to not pay PMI. You can't avoid paying PMI with an FHA loan.

Message 2 of 17
Frequent Contributor

Re: Avoiding PMI with FHA

Even If i got the 20% down my scores are not feasable for a conventional loan im sure. Thanks for your answer


Starting Score: 530 (EQ) 03-2012
Current Score: 678 (TU) myFico 04-2013, 649 (EQ myFico
Goal Score: 720+

Wallet: Wells Fargo Secured- 400 CL, Capital One Secured- 250 CL, Credit One Unsecured- 300 CL
Message 3 of 17
Valued Contributor

Re: Avoiding PMI with FHA

The only way I know of to avoid the monthly MIP with FHA is to do a 15 year term. Most will require 22% Down payment.

You would still be required to pay the upfront MIP which is usually added into your loan.

Personally in your situation and what you are feeling you can afford you need to be looking at homes more in the range of 75-80k.
Good Luck
May all your dreams and wishes become a reality!
Message 4 of 17
Valued Contributor

Re: Avoiding PMI with FHA

I think if you are above 640, you're ok for conventional.

Message 5 of 17
Valued Member

Re: Avoiding PMI with FHA

I realize this is not what you are asking but it may help.  With a 660 score and a DTI no greater than 45% you can get a 80\10\10.  In case you are unaware it is a loan where 10% is put down and there are two seperate loans, one for 80% and the other for 10%.  The smaller loan is basically unsecured and will carry a higher interest rate, but does not typically last 30 years.  This allows you to avoid PMI. This is conventional only, not FHA.  The payments will be about the same as if you were paying PMI, but however the money is going toward equity.  At some point, generally way earlier than 30 years,  you will pay off the 10% and essentially be left with a smaller payment so it is good in that regard.

 

Again, not what you were asking but, based on your scores and trying to avoid PMI, I am familiar with this approach and thought it could help.  Of course I am assuming this is available to you in your area, I have spoken to several lenders who offer this in Texas. 

Message 6 of 17
Frequent Contributor

Re: Avoiding PMI with FHA

Wow thanks Henders, Ive never heard of this. This gives me a little more hope. I could also look into foreclosures and find HUD lendors and maybe get more bang for my buck. Thank you all for the contributions


Starting Score: 530 (EQ) 03-2012
Current Score: 678 (TU) myFico 04-2013, 649 (EQ myFico
Goal Score: 720+

Wallet: Wells Fargo Secured- 400 CL, Capital One Secured- 250 CL, Credit One Unsecured- 300 CL
Message 7 of 17
Valued Member

Re: Avoiding PMI with FHA

Good point, I forgot about Fannie Mae homepath.  AS low as 3% down (700 score) 5% with 660 score and no PMI required.  You just need to use a lender who does homepath loans.  Also an appraisal is not required.   Only problem with homepath is the good homes have the likelhood of a multiple offer bidding war and the inventory can be a mess. 

Message 8 of 17
Valued Contributor

Re: Avoiding PMI with FHA

The only set back with the 2 separate mortgages is the second mortgage will be at a higher interest rate. The qualifications are steeper. Your overall payment will be pretty equal to the loan with PMI and possibly higher.

But as pointed out it is an option.
Good Luck
May all your dreams and wishes become a reality!
Message 9 of 17

Re: Avoiding PMI with FHA

BB&T Chip program sounds like something you should look into. Regions has a similar program called Affordable 97. 

Message 10 of 17
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