Question about PMI and Potentially Delaying Mortgage Closing - thanks in advance for the advice.

[BlackEagle1]

Hi Folks - I'm scheduled to close on a new construction home 8/30. The kids start school here in MD on 9/3. They enroll in new schools and I want to get them settled as much as possible. That background might come in handy for the scenario that I'm seeking advice on.

Here's the scenario: purchase price is $439,540. I'm currently doing an FHA loan with 3.5% down. My mortgage credit score is 726. The loan estimate has me paying $300 month in PMI. The issue is that in October I get my yearly sales bonus; at that time I can put down the ~$90K needed to cover the 20% down payment to remove PMI. Questions for those experienced in the industry:

1. Should / can I delay closing for two months? If so should I go conventional?

2. Should I move forward with the FHA loan and refinance quickly? How soon can one refinance?

3. Should I move forward with the FHA loan and simply pay $90K on the principal of the loan and reduce the amount to have PMI removed?

Thanks for your help in advance.

[JGGM]

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@BlackEagle1 wrote:

Hi Folks - I'm scheduled to close on a new construction home 8/30. The kids start school here in MD on 9/3. They enroll in new schools and I want to get them settled as much as possible. That background might come in handy for the scenario that I'm seeking advice on.

Here's the scenario: purchase price is $439,540. I'm currently doing an FHA loan with 3.5% down. My mortgage credit score is 726. The loan estimate has me paying $300 month in PMI. The issue is that in October I get my yearly sales bonus; at that time I can put down the ~$90K needed to cover the 20% down payment to remove PMI. Questions for those experienced in the industry:

1. Should / can I delay closing for two months? If so should I go conventional?

2. Should I move forward with the FHA loan and refinance quickly? How soon can one refinance?

3. Should I move forward with the FHA loan and simply pay $90K on the principal of the loan and reduce the amount to have PMI removed?

Thanks for your help in advance.

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I'm not an expert, nor do I work in the mortgage industry, but just a couple thoughts:

1) Would the builder be willing to wait till most likely November to close? Seems unlikely, in my experience.

2) I think I've read that FHA can be refinanced in 6 months? Again an expert can tell you that for sure.

3) It is my understanding that PMI is for the life of the loan on FHA loans. Meaning if you pay that $90k in October your PMI won't drop off, you'd still have to refinance to a conventional loan.

Again - not an expert, if nothing else just ideas to bounce off of. Best of luck!

[Anonymous]

@BlackEagle1

I'm planning to get an FHA loan in the next 2 months... which is the interest you were offered???

Thank you

[Mortgage-Specialist]

Unless you put 10% down on an FHA loan purchase, you will have mtg insurance for the life of the loan.

The builder isnt going to want his funds tied up for another month or 2.  You're best option is to do a Conventional mortgage now (with 5% down)  Then once you receive the rest of your funds, you can pay that down and have the mortgage insurance removed. 

[VALoanMaster]

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@BlackEagle1 wrote:

Hi Folks - I'm scheduled to close on a new construction home 8/30. The kids start school here in MD on 9/3. They enroll in new schools and I want to get them settled as much as possible. That background might come in handy for the scenario that I'm seeking advice on.

Here's the scenario: purchase price is $439,540. I'm currently doing an FHA loan with 3.5% down. My mortgage credit score is 726. The loan estimate has me paying $300 month in PMI. The issue is that in October I get my yearly sales bonus; at that time I can put down the ~$90K needed to cover the 20% down payment to remove PMI. Questions for those experienced in the industry:

1. Should / can I delay closing for two months? If so should I go conventional?

2. Should I move forward with the FHA loan and refinance quickly? How soon can one refinance?

3. Should I move forward with the FHA loan and simply pay $90K on the principal of the loan and reduce the amount to have PMI removed?

Thanks for your help in advance.

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Why are you going FHA & not conventional?

[BlackEagle1]

VALoanMaster - the builder's mortgage company pressed me towards FHA originally. Then I found this forum.

[VALoanMaster]

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@BlackEagle1 wrote:

VALoanMaster - the builder's mortgage company pressed me towards FHA originally. Then I found this forum.

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With your scores, I would look into a conventional with 5% down & then look at what your break even point is before deciding to put 90K towards your mortgage balance.

Does that make sense?

[BlackEagle1]

It does but I definitely have more questions and need more guidance. Sent a message to your inbox. 

[Anonymous]

Market is really high now,I wouldn’t put that 90k on the mortgage I would invest it pmi rate is .85. You will can probably find a better return without risking the equity on this market.