If you are a homeowner who used an FHA loan to help finance your purchase, you more than likely have been paying a mortgage insurance premium. If you are able to meet certain specifications, you might be able to eliminate these insurance payments and save a substantial amount of money. If you are a homeowner in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and have questions about your home loan and mortgage insurance, Foundation Mortgage can help. Continue reading to learn more about understanding mortgage insurance premiums.
What Are Mortgage Insurance Premiums?
If a borrower uses an FHA loan to finance the purchase of a property, a lender will require a mortgage insurance premium, (MIP), to help protect themselves from any financial losses if a borrower defaults on the loan and is unable to make payments. Oftentimes, FHA loans have less restrictive credit requirements and can have low down payment amounts to help borrowers with lower credit become a homeowner, which can be risky for lenders. Because of these factors, an FHA mortgage requires private mortgage insurance for every loan, unlike a conventional loan, which only requires private mortgage insurance, (PMI), if the down payment is less than twenty percent. If you purchase a home with an FHA loan, you will typically be required to pay an upfront insurance premium of 1.75% of the total loan amount, and an annual premium of approximately 0.45% to 1.05%.
Can I Remove Mortgage Insurance Premiums?
If you bought a home with an FHA loan, you may be able to eliminate your mortgage insurance premiums, depending on the loan origination date. If your loan was issued between December 31, 2000 through July 3, 2013, and if you have paid 78% or more of the loan-to-value, (LTV), you can qualify to cancel your MIP. If your loan was issued after July 3, 2013, and made a down payment that was less than 10 percent, you will be required to pay MIP for the entire duration of the loan, however, there is an option of refinancing that loan with a non-FHA loan and then eliminating mortgage insurance premiums. It is important to note that if you refinance from an FHA loan to a conventional loan, you will need to pay private mortgage insurance, however, PMI is generally less expensive than private mortgage insurance, and can also be canceled once the principal balance of the conventional loan is 78 percent of the property’s value.
Mortgage Insurance Premium Assistance
There are several costs associated with home ownership, including insurance costs. If you are located in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and interested in refinancing your mortgage or eliminating mortgage insurance premiums, contact us today for a consultation.