How does refinancing to get off an FHA loan work?
Great question!I assume the reason to get off FHA is to get rid of Mortgage Insurance. The way to do this is apply for a conventional mortgage with your favorite mortgage broker. Assuming the loan compared to the value of the home is 80% there would be no Mortgage insurance. If it is higher then there would be MI until such time as the LTV drops below the 80% threshold.Qualifying for the loan is much the same as when you did the FHA loan. Options for cash out if the LTV supports it or just finance the current balance.Let me know if you have additional questions that I did not cover.
FHA Loan and mortgage question?
My credit score is 650, debt to income ratio is 24% and going down, and I make around $100k a year. Been with the same company for 3 1/2 years, promoted 7 months ago, and love my job. My issue here is my credit history. I'm 29 years old and it's been a rocky road because of a few bad decisions in the past. There are no repo's or bankruptcies but a bad charge off, late payments etc... The good thing is that in the past 2-3 years, I've haven't missed any payments or made any late payments. Income taxes are slowly killing me and purchasing a home will definitely help with a nice deduction. As well, I've always wanted to be a home owner. What are my chances here at getting a decent FHA loan or any loan for that matter? I'm figuring a home purchase of around $200k with $10k down...
Which home loan is better FHA or CONVENTIONAL?
FHA and conventional loans are two different programs with two different target markets. Conventional- usually for the better qualified borrower. The credit, income, down payment requirements are more strict. It has higher loan amounts and, if your LTV is over 80% MI is cheaper and can be dropped once the loan balance is less than 80% of the property value. If you have little credit or bad credit, exceptions are harder to come by. Sources of down payment are also more lenient- FHA allows more to be from gifts. FHA-is government insured and, while it was traditionally for first-time home buyers that is not a requirement; however, there are more rules on owner occupation. You can sell your first home and pay off the FHA loan and still do an FHa on your next home (rules do apply though). For people with poor credit or little credit, there is more leniency (credit score minimum is 500 whereas Fannie and Freddie have minimums of 680), they allow you to carry more debt (41% of your monthly income whereas the conventional, especially now are holding to 38%), you can borrow a higher percentage (97% loan to value is the norm whereas conventionals are 80% plus, in conventional loans the mortgage insurance companies can deny you even if the lender approves your loan. FHA has one approval process so if you have an 80% loan to value or a 90%, you don't have to worry about another set of qualification standards to meet.). FHA will permit you to get the entire down payment from gifts whereas fannie and freddie will not. FHA does not do second home or investment loans, they have longer owner occupancy requirements, they have different requirements for the appraisal (there is though a rehab loan program that allows people to buy homes with problems and borrow the purchase price plus the rehab costs), MI on FHA is more expensive and cannot be dropped even if you pay off a large chunk of the principal or the property value increases. It comes down to FHA is a government insured program whose mission is to help as many people as reasonably possible to have a chance at owning a home. Conventional loans are a business profit making prospect and,they are only going to do loans where the investors will make a profit amd not lose their investment so they want the "safer" loans.
Should I refinance to avoid PMI if I am currently paying on an FHA home mortgage?
It depends on when your loan was originated / your loan amount. If you owe $20,000 and your PMI is $30/ month, it doesn’t make sense to pay closing costs to refinance.But if you still owe $200,000 and your PMI is $160/month, then yes if you’ll have 20% equity after a new appraisal is done, then it’ll be worth it… as long as you don’t sell the house within 2 years. Then it’s a wash because your paid closing costs in order to get rid of your PMI. There’s always a break even point with refinancing and anything after that break even point is when you start to realize savings due a lower rate or no PMI, etc
Should I refinance to remove PMI?
I bought a home in 2010. I have an FHA loan with PMI. I owe 160k and the home is worth about 255k. My interest rate is 4.375%. I want to remove the PMI. Spoke to lender and told me I needed to wait for certain yrs and meet some other criteria. They told me the only option us refinancing. Would it be worth it?
Difference between v.a.-f.h.a- and conventional home loans.?
conventional normally requires 5% down...and will probably get you the best rates...high pmi payments FHA requires 2.25% down...has a 1.5% funding fee...has pretty good rates...with a discounted PMI. VA requires nothing down...2.2% funding fee...and no pmi. VA is one of the hardest loan to approve due to the PROPERTY having to be approved. If you dont have handlebars stairs with more than 3steps...they will require for you to put it in....if you have cracked sidewalks...they would need to be fixed before closing....other conditions apply...if it isnt done then you wont close!
Removing PMI from a FHA loan faster than required?
Unfortunately, Steve and Equality are both incorrect. I just want to make sure I fully understad. I am assuming that the purchase price is $375k and the loan amount is $306k. If that is the case..... First, for FHA loans you don't pay PMI, you pay a MIP (Mortgage Insurance Premium) but that doesn't really matter since they are about the same thing. Most importantly you have to pay the monthly MIP for 5 years. Once again.....it cannot be removed on an FHA loan or 5 years! For FHA loans you will not only pay a monthly MIP, but you will also pay an up front MIP which will be about $3000. Your monthly MIP will be about $267/month. OUCH. If I were you, I would absolutely not take out an FHA loan. In fact, any lender that has recommended this product to you is not doing their job. All you have to do is put an additional $6000 down to cover the full 20% down. Again, I'm not sure if I fully understand if you are "purchasing" the home or if you already "own" the home. If you already own your home refinance your home immediately into a conventional mortgage up to 80% of the value of your home. Take a 401k or whatever you need to come up with the difference so that you are exactly at 80%. After you close on the refinance you can either keep the 401k loan or take a 2nd mortgage to pay it off. Either way paying over $200 in mortgage insurance is wasting your money. If you want to leave additional details on what is your exact situation I'd be happy to add more recommendations on what you need to do.