Portal Forum General General Discussion Home Ownership Reply To: Home Ownership

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@Don Adams Wheel of Justice wrote:

An FHA mortgage and PMI can be substantially more expensive than a conventional. Not just a few bucks more a month.

And as I remember it, if you get an FHA loan, you can’t remove pmi just by building equity. You have to make a certain number of payments before you can get it without refinancing.

This site seems to back that up.
http://blog.credit.com/2014/10/this-mor … ary-98077/

And PMI is not cheap.

Let’s use some real numbers.

Assume you’re buying a $200,000 house with an FHA loan. Your up front MI is $3,378 and your monthly MI is $136.71. Excluding taxes and insurance, your monthly payment is $1,046. Unless you put 10% down, your monthly MI is permanent. With at least 10% down, it goes away after 11 years.

A conventional loan with 5% down won’t have the up front MI, monthly MI goes away automatically once you get to 78%, and the monthly MI is around $115 per month.

FHA is not for the strong borrower with great credit and 5% down. It’s for the iffy credit scores or those who want to buy more house than they can qualify for conventionally.

We had an interesting situation. We bought near the bottom of the market for our area in Late 2011. We were looking at houses around half what we were pre-approved for (which was an outrageous number we could never have afforded, not sure where the bank got that number from) and could afford to put 15% down, but weren’t comfortable doing 20% (didn’t like the lack of cushion left in savings).

We were told we would get better rates putting 10% down versus 5%, but there was no benefit to put 15% down compared to 10%, except a lower monthly payment. What our lender suggested was to use that 5% and pay our PMI up front. They said we would be paying for at least 2 years PMI, before we could get an appraisal to judge if we were at 80% loan-to-value, and if we weren’t there, it would be at least another 2 years before we could get another appraisal. On top of that the break even point they told us, for our situation, was 22 months. So by paying upfront we paid 22 months of PMI, instead of paying smaller amounts for at least 24 months if not many more. So we haven’t paid any PMI since closing… Is this common? This seems a whole lot different than the 11 years you are talking about above (is that just an FHA thing? we did a conventional 30 year).