How do I get rid of my FHA PMI?

How do I get rid of my FHA PMI?

Understanding FHA PMI

Unlike conventional loans, FHA loans require PMI throughout the entire loan term, regardless of the loan-to-value ratio. This means that even if you have built enough equity in your home, you will still have to pay for PMI. However, there are some ways to remove it sooner.

1. Wait for automatic termination

FHA loans originated after June 3, 2013, are subject to the MIP (Mortgage Insurance Premium) for the loan's entire life. However, if your loan was originated before this date, you can benefit from automatic termination. If you meet certain criteria, such as making your mortgage payments on time and having at least 22% equity in your home, your PMI will be automatically cancelled.

2. Request PMI cancellation

If your loan was originated after June 3, 2013, and you want to get rid of your PMI, you will need to request its cancellation. To be eligible, you must have paid the mortgage insurance premiums for at least 11 years and have at least 20% equity in your home. You will need to contact your lender and provide them with the necessary documentation to prove that you meet these requirements.

3. Refinance your FHA loan

An option to consider if you want to eliminate your FHA PMI is refinancing your loan. This involves obtaining a new mortgage with better terms, such as a lower interest rate or a different loan type. By refinancing, you can get rid of your PMI if the new loan-to-value ratio is below 80%. However, refinancing comes with its own costs, so make sure to weigh the expenses versus the potential savings.

4. Make extra mortgage payments

If your goal is to eliminate your PMI as soon as possible, you can consider making extra mortgage payments towards your principal balance. By paying more than the required monthly payment, you can build equity faster and reach the 20% equity threshold sooner. Once you have reached this amount, you can request the cancellation of your PMI.

5. Increase your home's value

If your home has appreciated in value since you bought it, you may be able to eliminate your PMI by getting a new appraisal. If the appraisal shows that your loan-to-value ratio is below 80%, you can request the removal of your PMI. Keep in mind that the cost of the appraisal and the potential increase in property taxes should be taken into consideration.

Conclusion

Getting rid of your FHA PMI can help you save money in the long run. Whether you wait for automatic termination, request cancellation, refinance, make extra mortgage payments, or increase your home's value, it's important to understand the requirements and costs associated with each option. Choose the best strategy that suits your financial goals and consult with a mortgage professional to guide you through the process.

Frequently Asked Questions

To remove FHA PMI from your loan, you have two options: refinancing your loan or requesting a mortgage servicer to cancel it. Refinancing involves getting a new loan with better terms, such as a conventional mortgage. To request cancellation, you must meet certain criteria, such as having a loan-to-value ratio below 80% and being current on your mortgage payments for at least five years.

Loan-to-value (LTV) ratio is the percentage of your loan amount compared to the appraised value of your property. It affects FHA PMI removal because one of the criteria for cancellation is having an LTV ratio below 80%. If your LTV ratio is above this threshold, you may need to make additional principal payments or wait until you reach the necessary equity to remove FHA PMI.

Yes, you can remove FHA PMI even if you made a low down payment. However, you must meet the criteria mentioned earlier, such as having an LTV ratio below 80%, being current on your mortgage payments for at least five years, and having a good payment history. Making extra principal payments or refinancing to a conventional loan with a higher down payment may help you reach the LTV ratio requirement sooner.

If you want to remove FHA PMI through loan-to-value ratio, you may need to obtain a new appraisal to assess the current value of your property. However, if you opt for cancellation based on a good payment history, you may not need an appraisal. Contact your mortgage servicer or lender to determine the specific requirements for removing FHA PMI.

The time it takes to remove FHA PMI varies based on individual circumstances and actions taken. If you are eligible for cancellation based on reaching an LTV ratio below 80%, it may take several years of making regular mortgage payments and potentially making extra principal payments. Refinancing to a conventional loan can remove FHA PMI immediately, but it depends on the timing and process of the refinancing. Contact your mortgage servicer or lender for more accurate information regarding your specific situation.