How to Remove PMI From Your FHA Loan

FHA loans offer a great opportunity to get into a house with a small down payment, but there are some downsides. One of these is the fact that you’ll have to pay for private mortgage insurance, or PMI, if you put less than 20% down.

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Mortgage Insurance

If you’re like most homebuyers, you probably got an FHA loan because you didn’t have the 20% down payment that most conventional loans require. And that’s okay. FHA loans make homeownership achievable for many people who wouldn’t otherwise be able to buy a home. But there’s a downside to FHA loans: Mortgage insurance.

FHA Mortgage Insurance

Mortgage insurance is required on all FHA loans unless 20 percent equity already exists in the home at the time of the loan funding. Otherwise, borrowers must wait for the loan balance to achieve 22 percent equity to eliminate MIP.

MIP is different from and should not be confused with PMI, or private mortgage insurance, which applies to conventional mortgage loans and requires a separate policy.

Private Mortgage Insurance

Private mortgage insurance, or PMI, is required on most home loans with a down payment of less than 20%.It protects the lender in case you were to default on your loan. FHA loans are one type of loan that does require PMI. With an FHA loan, you’ll pay an upfront premium when taking out the loan as well as an annual premium.

For most people, private mortgage insurance is a necessary evil. If you can’t put down 20% when buying a home, you’ll likely have to pay PMI. But there are a few ways to remove PMI from your monthly mortgage payment:

1) Make sure you get rate quotes with and without pmi so that you know the difference in monthly payments.
2) Once you have 20% equity in your home, you can contact your lender and request that they remove the PMI from your monthly payment.
3) You can also refinance your home to get rid of PMI if you have enough equity in the property.

How to Remove PMI From Your FHA Loan

If you have an FHA loan, you’re paying for mortgage insurance (PMI) each month. This is a fee the Federal Housing Administration collects to insure their loans in case borrowers default. You’re paying for something you may never use, and there’s a way to get rid of it. You can remove PMI from your FHA loan by following a few simple steps.

Request PMI cancellation

FHA loans offer a great opportunity to get into a house with a small down payment, but they also come with their own set of costs and expenses. One of the most common is the mortgage insurance premium (MIP) that is charged on all FHA loans.

MIP is similar to the private mortgage insurance (PMI) that is charged on conventional loans with less than 20 percent down. Both MIP and PMI protect the lender in case you default on your loan.

MIP is required on all FHA loans with less than 20 percent down. It can be paid upfront or rolled into your monthly payment. The annual premium is divided into 12 monthly payments and added to your mortgage payment.

You can request that your lender cancel MIP when you reach 20 percent equity in your home. You will need to provide proof of equity, such as a new appraisal, before the lender will agree to cancel MIP.

You can also wait for MIP to cancel automatically when you reach 22 percent equity in your home, based on the original purchase price or appraised value at the time you obtained your loan.

Refinance

You can avoid paying PMI by refinancing your loan once you have more than 20% equity in your home. If you refinance your loan with a conventional lender, they may require you to pay PMI if you did not pay it upfront or if your original loan was an FHA loan.

Wait for automatic cancellation

One way to get rid of PMI is to simply wait for it to cancel on its own. PMI is required on all FHA loans with a down payment of less than 20%. For borrowers with a down payment of at least 22%, there is the option to request that PMI be terminated once you reach 22% home equity.