When Can My FHA MIP Be Cancelled
by Debbie in Post Falls, Idaho and Linda T. in Picayune, MS
Ask Kate how soon your FHA mortgage insurance premiums can be cancelled: When Debbie bought her home, she put down 10% and 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.
On this page you will also meet a homeowner whose Fannie Mae mortgage was just sold to another loan servicer. Here's the trouble. The new servicer is demanding that Linda sets up an escrow account. Understandably, Linda is asking me who at Fannie Mae she can contact for help.
How Long Am I Required to Pay FHA MIP By Debbie in Post Falls, Idaho
You helped me a lot while we were having problems last year. We actually got a small house built at a payment we could afford and a very low interest rate. (3.375%) It's a 30 year FHA.
We paid just under 10% down. The appraisals were going up so our money guy and realtor guy said to get it re-appraised and it would probably be good enough to drop the $140 a month we are paying for the MIP.
Well, I looked into it and discovered that a law was passed in 2007 forcing people to pay the MIP a minimum of 5 years, no matter how much extra you paid or whether or not you were at 78%.
The only 'loophole' I saw was if your loan was a 15 year. Why would they tell us to do this if the MIP has a minimum of 5 years?
And now I have read that as of last June you have that insurance for the life of the loan! Is what I read true and did these guys just lie or what?
We are not really in a position to pay extra, (hubby's hours were cut right after we bought the house, of course) so if this is true, I don't really want to try and come up with extra.
But how annoying to find this out AFTER we bought it and thought we could get rid of it sooner...
Thanks! Debbie in Post Falls, Idaho
Ask Kate answers: How Long Am I Required to Pay FHA MIP
I'm so happy to hear from you. Congratulations on getting your home.
FHA financing makes homeownership affordable with down payments as low as 3.5%. The government insured program is also more easy-squeezy on less-than-perfect credit.
That being said, it does have a sticking point, the mortgage insurance.
During a robust economy, FHA occasionally lowers both the upfront financed and the annual (paid monthly) mortgage insurance premiums. But as real estate and financial markets deteriorate, FHA gradually tightens its belt.
How Much Does FHA Mortgage Insurance Cost Today?
So, how much should homeowners plan on paying for FHA mortgage insurance? Effective January 26, 2015, annual FHA mortgage insurance for new mortgages are as follows...
- For 15 year loans over 90% loan-to-value, .70% annual mortgage insurance premiums
- For 15 year loans under 90% loan-to-value, .45% annual mortgage insurance premiums.
- For 30 year loans over 95% loan-to-value, .85% annual mortgage insurance premiums.
- For 30 year loans under 95% loan-to-value, .80% annual mortgage insurance premiums.
How Mortgage Insurance is Cancelled
For FHA mortgage case numbers dated before June 3, 2013, annual mortgage insurance premiums are cancelled as follows...
- For 30 year terms: Once the loan reaches 78% loan-to-value and the annual MI premiums have been paid for at least 5 years (60 payments).
- For 15 year terms: Once the loan reaches 78% loan-to-value.
But if your FHA case number was assigned on or after June 3, 2013...
- Original loans less than or equal to 90% loan-to-value will pay annual mortgage insurance premiums for 11 years.
- Original loans greater than 90% loan-to-value will be charged annual mortgage insurance premiums until the mortgage is paid off.
Ouch! This means, regardless of future equity, the term of the loan, or how many payments have been made, MIP is a fixture if a minimum down payment was used.
FHA Exceptions and Changes
FHA is a complicated government insured mortgage program. There are often changes and exceptions to many of the guidelines... exceptions for large mortgage amounts, exceptions for older mortgages (endorsed before May 31, 2009), exceptions for streamline refinancing, and changes to dates.
So it is always recommended to call your loan servicer for personalized details. Have your loan number available. Ask for a printout showing if and when you can get rid of your mortgage insurance. Then you will have it in writing.
Get Promised Terms in Writing
As far as what you were promised by the real estate agent, it may have been an innocent error. Then again, it could have been a sweep-it-under-the-rug tactic to encourage you to overlook the cost of the MIP.
I hope not. That would be much worse than annoying. Regardless, it is very important to get all terms in writing. You can't turn back the clock but remember this for your next mortgage application.
If Payments Become Unaffordable: FHA Loan Modifications
I'm sorry to hear about your husband's hours being cut. If you begin to struggle with the house payment, don't hesitate to call your loan servicer. There is a loan modification program expressly created for FHA mortgages.Tip:
If you plan on paying off FHA financing, you may be entitled to an MIP refund
Fannie Mae Escrow Account By Linda T. in Picayune, MS
Who do I call to get a letter from Fannie Mae stating that I do not have to have a escrow account on my mortgage? My Fannie Mae mortgage that I have had since 2007 has never had an escrow account.
Now that it has been transferred to Ocwen mortgage, they are saying that Fannie Mae requires an escrow account.
This raises my mortgage payment from $648.77 to $980.22 a month. I am on social security and can't afford this payment.
But they will not cancel the escrow account even though I told them it is not required by Fannie Mae. I thank you in advance for your help.
Ask Kate answers: Fannie Mae Escrow Account
An escrow account is sometimes required by lenders to include property taxes and homeowner’s insurance premiums in the monthly house payments.
If this is a requirement of the loan approval, the escrow must be disclosed in the Good Faith Estimate. Otherwise, the homeowner will be allowed to pay county property taxes and homeowner's insurance premiums on their own.
Note though, for homeowners who fail to stay current, a lender has the right to require an escrow account. Additionally, in the case of loan modifications
, escrow accounts are almost always required.
But moving on, if your final loan documents allow you pay property taxes and insurance premiums without an escrow account, the new servicer cannot alter this term. So dig through your paperwork for the Good Faith Estimate
where it should state that you were not required to establish an escrow account.
Give this evidence to your lender and hopefully they will respond satisfactorily. If not, it is time to contact authorities.
Where to Report a Mortgage Complaint
- How to contact Mississippi Attorney General's Office: 601-359-368
- How to contact HUD: 202-708-0502
- How to contact Fannie Mae: 800-732-6643
Very best wishes,
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