Lately Ive been getting enough calls for people trying to refinance their FHA loan for lower rate (Called an FHA streamline). Most of these calls the consumer states their LO told them that they can remove the MIP once they have 20% equity which is partially true as most LO's won't go into detail about it, so I will elaborate for the masses that don't know.
FHA loans: Most people in an FHA loan are in a 30 year fixed and the majority of the consumers put less than 10% down so based on this statement the consumer would be paying MIP for the entire 30 years of the loan (if they stayed in it without ever refinancing). If they refinanced (FHA Simple, not a streamline) and had 20% equity (FHA only requires 10%) in the home the MIP would be for 11 years not 30.
What the LO's don't divulge when they say it can be removed at 20% is saying the FHA loan has to be refinanced into a CNV loan (Fannie Mae, Freddie Mac). Hope this helps clear up confusion
Term | LTV% | Duration |
≤ 15 years | ≤ 78% | 11 years |
≤ 15 years | > 78% but ≤ 90% | 11 years |
≤ 15 years | > 90% | Mortgage Term |
> 15 years | ≤ 78% | 11 years |
> 15 years | > 78% but ≤ 90% | 11 years |
> 15 years | > 90% | Mortgage Term |
