PMI Removal - FHA Loan

8 Replies

Hi All, i have a SFR that i purchased about 5 years ago - and per the HUD it says for the PMI/MIP to be removed, i must pay premiums for 5 years and the LTV needs to be at 78%. Now i just hit 5 years, and the home has nearly doubled in value. I contacted the lender, and they said "Per Investor guidelines, we must use the appraised value or sales price of the home from closing (whichever is lower)" - so naturally the sales price of the home was much lower because it needed work and is at only 87% LTV based on that original number 5 years ago. Any thoughts on if this is true even, and what options i may have? Thanks.

If the loan was issued prior to June 2013 I think, it is 5 years and 78% ltv based on purchase price. After June 2013 and under 10% down is permanent PMI.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

So it was Jan 2013. Put down 3.5% it was 203k loan. 

I bought a fha sfh in 09, refi in 2013.. so my
Pmi should come off middle of next year. I repaired property and believed value went up so I decided to do conventional refi for a few reasons. Purchased property for 238k. 3.5% down. Current loan balance 202k, got appraised for 355k, so 70% ltv is 245k. I'm going to cashout refi to 245k so get 43k cashout (38k after refi fees). Because I pay pmi now my payment will stay the same. Going from 3.25 rate to 4.5 rate which sucks but I'm getting all my money out of the property, will have 38k for another property, and still have $700 monthly cash flow as well as 110k in equity and a safe ltv. Get the pmi off by getting appraisal done if you think the value is there.. if so farm your money invested out of the property and fund another deal. LEVERAGE- BRRRR

Braden, that's a nice point. I'm not ready to move on to the next one yet. I know I have the value in appraisal, but I am fighting against the bank who won't budge?

Originally posted by @Isaac S. :

Braden, that's a nice point. I'm not ready to move on to the next one yet. I know I have the value in appraisal, but I am fighting against the bank who won't budge?

 They wont budge because their are guidelines to how the loan works. 78% ltv based on the purchase price and the pmi will drop off if issued prior to June 2013. Appraised value is irrelevant.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

@Isaac S. there is a way to do it but it must be initiated by the lender. You basically ask them to agree to convert it to a conventional loan. You would of course give up any benefits associated with an FHA such as assumability but it may be a better play financially to do the conversion if the bank is agreeable to it.

Originally posted by @Jeshua Patrick :

@Isaac S. there is a way to do it but it must be initiated by the lender. You basically ask them to agree to convert it to a conventional loan. You would of course give up any benefits associated with an FHA such as assumability but it may be a better play financially to do the conversion if the bank is agreeable to it.

If you "ask them to agree to convert it to a conventional loan", that's not the same as "it must be initiated by the lender"!

ie. This looks to be no different than any FHA-approved loan (whether pre-June or post-June of 2013), whereby anyone can refinance out of an FHA-loan as soon as they hit 20-22%+ equity (and meet DTI requirements), right? [If one lender balks - ask another!] Cheers...

You might want to ask if you were to have a new appraisal done will they use that as the appraised value they are using in their guidelines.

I have removed PMI from about 5 loans and always went that route, usually after a few years...not 5. You will have to look at the cost of PMI vs cost of appraisal, but I bet it will save you in the end.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.