Q. I currently have an FHA loan. I am getting close to a 20-25% equity position in my home. Can I request the removal of mortgage insurance on this loan?
A. Purchasing a home through a FHA (Federal Housing Administration) supervised lender permits the buyer to obtain financing with limited cash outlay and limited cash reserves after the close of escrow. Assuming your were a buyer with limited cash for a downpayment, you would have purchased mortgage insurance. This premium can be paid out of pocket at time of closing, financed in the loan, given as a gift to the borrower or paid by another person.
Most FHA buyers finance the mortgage insurance premium in the loan and make monthly payments accordingly, thus a $150,000 home will have a starting loan balance of approximately $148,000 including the computed upfront lifetime mortgage insurance premium. Since your mortgage insurance is part of the loan balance, the lender will not rewrite or modify the note to remove the MI costs.
If you want to eliminate the mortgage insurance for this loan, you must refinance the property. If you had a conventional loan with mortgage insurance, your MI premium being a separate entity may be removed with sufficient equity. T.H. Pomona
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