Is Refinancing My FHA Loan Necessary to Cancel MI

by Bob from Montgomery, IL

Ask Kate if refinancing my FHA loan is necessary to remove the mortgage insurance: FHA mortgage insurance (MIP) allows borrowers with a small down payment to buy a home. Additionally, FHA refinance guidelines often require less equity than conventional programs. But Bob asks the million dollar question. How and when can I cancel FHA mortgage insurance?

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Ask Kate: Refinancing without PMI

By Bob from Montgomery, IL
Refinancing without PMI

Kate,

Will I have PMI on a FHA loan for buying a home?

Will the PMI ever go away unless I refinance or pay off the mortgage?

How long until I can apply to refinance under HARP?

***zz-portrait-left.shtml*** Kate's Answer: Refinancing without PMI

Hi Bob,

Excellent questions.

Let's take it from the top!

Bob's Question: Will I have PMI on a FHA loan for buying a home?

Kate's Answer: Yes, most borrowers who mortgage a home using FHA financing will pay two types of mortgage insurance, annual and upfront.

Annual FHA Mortgage Insurance: Depending on your loan amount and the length of your mortgage, the annual mortgage insurance (divided into 12 equal parts and paid monthly in your mortgage payment) varies.

Effective January 26, 2015, FHA made annual mortgage insurance more affordable to bolster real estate market. See the current premiums at Breaking News: Reduced FHA Annual Mortgage Insurance.

Upfront FHA Mortgage Insurance: FHA borrowers also pay upfront mortgage insurance (UFMIP) which is generally financed into the loan amount. Depending on when an FHA loan is paid in full, a refund is issued. Get more details at Do You Know About FHA Refunds.

Bob's Question: Will the PMI ever go away unless I refinance or pay off the mortgage?

Kate's Answer: Annual mortgage insurance (remember this is the premium that is paid monthly) is more difficult to cancel since the change made by HUD for FHA case numbers assigned on or after June 3, 2013.

This question was also asked by Debbie who put down 10% when she applied for FHA financing. She was excited to learn from her real estate agent that she could soon get rid of the mortgage insurance premiums for the price of a new appraisal. But now she's annoyed and feeling misled, for good reason.

Be sure to read the rest of her story and my answer at How Soon Can My FHA Mortgage Insurance Be Cancelled.

Bob's Question: How long until I can apply to refinance under HARP?

Kate's Answer: Home Affordable Refinance Program (HARP) is only for Fannie Mae and Freddie Mac mortgages with promissory notes that were dated on or before May 31, 2009. Borrowers with eligible mortgages should keep in mind that the HARP program is set to expire.

See my overview of the program expiration date, eligibility, and and guidelines at HARP 2.0 Loan Announcement.

FHA Streamline Refinance

Instead of refinancing under the HARP program, you may be interested in reading about FHA streamline refinancing.

But since there are a couple of hitches in the guidelines, please read my overview at FHA Streamline Refinancing Obama Announcement carefully.

Best wishes,

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