Confused about PMI...and how to avoid it...?

Real Estate Agent · Realtor - Dallas, TX · Member since 2013 · 342 posts · 55 votes

Hello all,

So...as I am researching the topic on PMI, I am coming up with conflicting responses. I am looking at a 3.5% (30 year) owner-occupied FHA loan for a duplex in Dallas.

From what I understand...is that, you will have to purchase PMI for loans for anything less than 20% down. I also read that some rules changed and now the PMI can NEVER be removed (even after 80% LTV is reached)

Is this correct?...and how much is PMI costing?

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Wayne Brooks

Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

12y

FHA has MIP now, on all loans, and it stays forever. Conventional hasn't changed.

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
@Scott E.

FHA, pre July 2013, is the same as conventional-based upon appraisal, not purchase price. Just an interesting tidbit-did you know loan officers who work for the banks do NOT have to get a license of any kind, go through the mandatory training for a license, and don't even need a NMLS number? You'd think they will still be up to speed on everything though, working for the big banks.
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James Mudd
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Real Estate Agent · Realtor - Dallas, TX · Member since 2013 · 342 posts · 55 votes
12y
Duncan Taylor ...yes, you are correct about the amortization table...but, I am planning on paying it down within a year to get the LTV below 80%....there's no way I'm hanging on to a lone for 30 years.
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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
James the point is with FHA you USED to could pay down to below 20% after a year or so and then go to remove ongoing MIP. MIP is FHA and PMI is conventional.

After April of 2013 with the low FHA down payment you cannot do that anymore. You are STUCK with that MIP for the life of the loan to pay for past losses FHA has taken.

The fact that you want to pay down below 80% is not going to help you with the FHA loan. Do you think you will be better just buying and rehabbing a quad and creating equity that way?? You are putting more money in but in a year if you do it right getting a lot more out and you do not have to live there in one of the units.

Go hard money and then move to conventional or sell it off and go to something else.
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Duncan Taylor
Real Estate Investor · Member since 2013 · 866 posts · 487 votes
12y
Originally posted by @James Mudd:
Duncan Taylor ...yes, you are correct about the amortization table...but, I am planning on paying it down within a year to get the LTV below 80%....there's no way I'm hanging on to a lone for 30 years.

There is something here I am missing.

You say you want to use FHA to maximize leverage but will then pay it down to under 80% in the first year?

That makes absolutely no sense to me.
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James Mudd
OP
Real Estate Agent · Realtor - Dallas, TX · Member since 2013 · 342 posts · 55 votes
12y
...and then refinance to conventional.
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James Mudd
OP
Real Estate Agent · Realtor - Dallas, TX · Member since 2013 · 342 posts · 55 votes
12y
Joel Owens ...hmmm good ideas...thanks for the input..!
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Duncan Taylor
Real Estate Investor · Member since 2013 · 866 posts · 487 votes
12y
Originally posted by @James Mudd:
...and then refinance to conventional.

Okay, so you will buy with FHA with little down, pay 100% of the upfront MIP which is 1.75% of the loan amount, pay the closing costs, then over the first year pay down the LTV to under 80%, then refinance conventional and pay all the closing costs again.

Sorry, it still does not make any sense.

Run the numbers, you would be a lot of money ahead by just getting a conventional loan at less than 80% LTV from day one.

What detail are you leaving out that makes this make sense to you?
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James Mudd
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Real Estate Agent · Realtor - Dallas, TX · Member since 2013 · 342 posts · 55 votes
12y
@Duncan Taylor ...yes, you are right. It would make more sense to just go conventional from day one. I forgot about all the closing costs etc. Plus, I really don't like being involved in anything the government has their hands in.
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