Showing posts with label FHA Mortgage insurance. Show all posts
Showing posts with label FHA Mortgage insurance. Show all posts

New Kentucky FHA Mortgage insurance Chart for 2015 with Changes effective Jan 26, 2015

New FHA MIP Chart for Kentucky FHA loans for refinances and purchase loans effective January 26,2015

Loan Purpose
Up-Front MI Premium
Endorsement Date of Current 
FHA-insured Mortgage
Purchase, Rate/Term Non-Streamline Refinance, Cash Out Refinance
Streamline Refinance
Endorsed on or after 06/01/2009
Streamline Refinance
Endorsed prior to 06/01/2009

For Loan Terms > 15 years
Loan Purpose
Base Loan Amount
Case Number Assigned on or After01/26/2015
Case Number Assigned6/03/2013–01/25/2015
Purchase, Rate/Term, Cash-Out, or Streamline Refinance Endorsed on or after 06/01/2009
> $625,500
> $625,500
FHA Streamline endorsed prior to 06/01/2009
All Loan Amounts
All LTVs

For Loan Terms <=15 Years
Loan Purpose
Base Loan Amount
Case Number Assigned 
on and after 6/03/2013
Purchase, Rate/Term, Cash-Out, or Streamline Refinance Endorsed on or after 06/01/2009
> $625,500
> $625,500
FHA Streamline endorsed prior to 06/01/2009

The length of time on which you'll pay mortgage insurance premiums on your FHA loan is as follows:
Mortgage Term
Loan to Value Ratio
Length of Mortgage Premium
15 years or shorter
Up to 90%
11 years
15 years or shorter
Greater than 90%
Full loan term
Greater than 15 years
Up to 90%
11 years
Greater than 15 years
Greater than 90%
Full loan term

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U.S. Dept HUD released Mortgagee Letter 15-01 today, which outlines plans to reduce the annual MIP (i.e., monthly MI payment) for certain section 203(b) Kentucky FHA-insured loans with Kentucky  FHA case numbers obtained on or after January 26, 2015.  KENTUCKY FHA MORTGAGE INSURANCE CHANGES 2015 Further details, effective date and action plan are outlined below:  
Effective Date
The reduced annual MIP (i.e., monthly MIP) premiums announced in this ML are effective for eligible Kentucky FHA loans (see below) with a case number issued on or after January 26, 2015.
Streamline Refinances for Kentucky FHA Mortgage Loans
The annual MIP (i.e., monthly MI) rate will remain the same for Streamline Refinances which are refinancing existing Kentucky FHA loans that were endorsed on or before May 31, 2009.  

Purchase and other Refinance transactions for Kentucky FHA Mortgage loans
For other affected loans with case numbers issued on or after January 26, 2015, the annual MIP rate (i.e., monthly MI) will be as follows:


Up Front MIP (UFMIP)
UFMIP for all FHA transactions remains unchanged at this time.

MI duration

The duration of MI for FHA loans is also unchanged, remaining effective for life of loan for most transactions.

As an example, on a Kentucky FHA loan with a $150k loan amount, the new reduced mortgage insurance premiums  will save the existing FHA Mortgage holder or new Kentucky FHA homebuyer potentially $65 a month, $780 year, and $23,400 over a 30 year term. As you can see, this is a huge savings with the new changes.

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What is the Current Mortgage Insurance Requirements for a Louisville Kentucky FHA Loan?

On a KY FHA loan , you typically have to pay both an upfront and an annual mortgage insurance premium (MIP):

Upfront MIP on A Kentucky FHA Loan

Kentucky FHA loans now collexct  upfront MIP cost 1.75% of the home loan. For instance, if you borrow $100,000, you must pay $1,750 ($100,000 x 1.75%). It can be paid in full upfront, or added to your mortgage balance. This MIP applies no matter your loan amount or term.  Most FHA buyers in Kentucky choose to finance the MIP into the loan. If you decide to pay the upfront MI out of your own funds, then you must pay all the mi premium, not just a part of it.  The FHA upfront mi fee is not refundable now. This is a change whereas you use to be able to get e refund if the loan was refinanced or paid off in the first 5 years.

Annual MIP on a Kentucky FHA loan

The  annual MIP or monthly mortgage insurance is divided by 12 and added to your monthly mortgage payment. The current maximum of 1.35% of the loan amount. How much and how long you have to pay the annual MIP depends on the originating date of your loan, the amount, and your loan-to-value ratio. For example, if you borrow $100,000 on a 30 year FHA loan, the monthly mortgage insurance would be
$112.00  ($100,00 x 1.35=$1350/12=$112.00 monthly mi)

The monthly mi payable to FHA is now for life of loan. This is a big change to keep in mind because FHA use to drop the monthly mi once you reached to 78% ltv of the original balance.

For Kentucky FHA loans with less than 15 year terms the monthly mortgage insurance (Annual MIP) much cheaper.

FHA is changing the duration for the collection of MIP:

o For all mortgages with an original principal LTV of 90% or less, regardless of loan term, the annual MIP will be assessed for 11 years.
o For all mortgages with an original principal LTV greater than 90%, regardless of loan term, the annual MIP will be assessed for the entire life of the loan.
Loans of 15 year terms or less with LTV 78% or less will pay an MIP amount of 45 bps.

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Louisville Kentucky FHA Mortgage Insurance Changes June 2013

Kentucky FHA Mortgage Insurance Premium (MIP) Changes

FHA Kentucky Mortgage Insurance Premium Changes

As announced in Mortgagee Letter 2013‐04, HUD will be removing the annual monthly Mortgage Insurance Premium (MIP) exemption for loans with terms of 15 years or less and loan‐to‐value (LTV) ratios less than or equal to 78% at origination. The period for assessing the annual monthly MIP has also been revised. These changes are effective for case numbers assigned on or after June 3, 2013 and are detailed below.
Increase to Annual MIP FHA loans with terms of 15 years or less and LTV ratios less than or equal to 78% at origination will now require annual monthly MIP. Streamline refinance transactions endorsed on or before May 31, 2009 are not affected by this change.

In the past, borrowers with  a Kentucky  FHA 30 year loans paid MIP as long as the LTV was greater than 78%. There was also a minimum payment period of 5 years (60 months). For 15 year loans, FHA required that the MIP be paid until the loan reaches 78% LTV, but there was no minimum 5 year requirement.
Effective June 3, 2013, the annual mortgage insurance premium for Kentucky FHA mortgages will no longer be based on a loan to value criteria of 78%. Cancellation of FHA MIP will be eliminated for loans that have a beginning LTV of 90% or more. For these loans, MIP must be paid for the entire term of the loan, in other words, forever. For loans that have a beginning LTV of 90% or less, the annual mortgage insurance premium will be required for 11 years.
This means that homeowners using an FHA mortgage for financing beginning June 3 will need a 10% or more down payment in order to cancel FHA MIP. Otherwise, MIP will no longer allowed to be canceled on a Kentucky FHA Mortgage loan. . 

The only way to cancel the mortgage insurance premium will be through a refinance to a conventional mortgage when the loan to value reaches 78%.

Note: HUD Form 92900‐B (Important Notice to Homebuyers) will be updated to include the revised MIP maximum duration on June 3, 2013.
FHA Case Number Assignments The last day the existing MIP is available is this Friday, May 31, 2013. In order to meet FHA’s deadline,

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How to Avoid Paying Private Mortgage Insurance | Equifax Finance Blog

How to Avoid Paying Private Mortgage Insurance | Equifax Finance Blog

If you’re getting a mortgage, you will first need to understand the term private mortgage insurance, also known as PMI. PMI, which nearly became extinct during the real estate boom years, is an insurance product created solely for the benefit of a lender, although the borrower usually pays it. It gives limited protection to a homeowner’s lender if a loan goes into default and foreclosure.
Traditionally, when getting a mortgage, if you have a 20 percent down payment, you won’t need to worry about PMI. But if you have less than 20 percent to put down toward the purchase of your home, or if you are trying to refinance your existing home and its value has gone down, you might have to consider paying for PMI.
You will generally pay for PMI with your monthly loan payment to your lender. However, there are loan programs that might allow you to make a one-time payment or a yearly payment for your mortgage insurance (MI).

Avoid Mortgage Insurance on a Loan
Here are some ways that you may be able to avoid paying MI on a loan.
  • Borrow no more than 80 percent of the home’s value.
  • Find a lender willing to give you a first mortgage in an amount equal to 80 percent of the home’s value. Then see if that same lender, or a different lender, is willing to give you an equity loan for a portion of the balance you need for the purchase of your home. This option has been referred to as a piggyback loan. In many instances, the first loan will be for 80 percent of the home’s value and the piggyback loan will be for an additional 5 percent, 10 percent, or 15 percent. The more you want to borrow in the piggyback loan scenario, the harder it might be for you to obtain the loan and the higher your interest rate and costs might be.
  • Obtain a loan for 80 percent of the home’s value and then have a family member gift you the difference you might need to buy the home.
  • Apply for a FHA loan. (Note that a FHA loan may actually be more costly for you than obtaining a non-FHA loan with MI.)
  • If you are buying a home, negotiate to have your seller pay the upfront MI cost. That cost could be negotiated as part of the contract, and the seller could pay your MI fee upfront as a closing cost credit. Once paid, you would not have to pay MI with that loan, but if you were to refinance that loan, you might then have to pay MI with the new loan.
  • Have the lender include the MI fee as part of the interest rate that it might charge you. The interest rate might be a tad higher and last for the life of the loan, and you will still technically be paying MI, but this does give you an additional option.
Remember that if you chose a higher interest rate for your loan as a way to cover your MI and you then keep the loan for its entire term, you may end up paying much more over the long term. On the other hand, if you pay the MI up front and refinance or sell shortly thereafter, you may lose some of that payment.
If you can avoid paying for mortgage insurance, and you don’t end up with a higher interest rate on your loan, remember to make sure your other options related to your loan work for you and don’t place an undue burden on you down the road.
Samuel Tamkin is a Chicago-based real estate attorney with more than 20 years of experience working with residential and commercial clients. Sam received his law degree from the University of Illinois College of Law in Champaign-Urbana. Sam currently practices as a real estate lawyer in Chicago, and his Ask the Lawyer column is syndicated in newspapers across the United States.

  1. Joel Lobb (NMLS#57916)
    Senior  Loan Officer
    502-905-3708 cell

Private mortgage insurance or MI

Private mortgage insurance or MI is a type of insurance provided by a private mortgage insurance company to protect a lender in the event of default on a loan. This type of insurance is generally required when a borrower has less than 20% equity in a home; i.e. the loan amount divided by the property value is 80.01% or greater.

Why does PMI exist? 
Mortgage companies have found that those with less that 20% equity are more likely to default on a mortgage.  The good news is that PMI allows homeowners to get into a house at good mortgage rates with less than 20% down.  That's about 1.5 Million homeowners in 1999 - about 10% of all mortgages. 
The purpose of PMI is to pay the mortgage company if the homeowner defaults on the mortgage.  

Who pays for private mortgage insurance?
The borrower pays for mortgage insurance on a monthly basis in addition to the principal and interest payments that are made on a loan. The lender then transfers these premium payments to the mortgage insurance company.

Besides a monthly premium, are there any upfront fees to pay?
Yes. MI companies offer several options to the borrower at the time of closing. A monthly premium plan requires two monthly premiums be paid during the closing, with a set monthly premium due thereafter as part of the required mortgage payment.
An annual plan requires one year of premiums paid at time of closing, with a lower monthly premium due thereafter.
It is generally recommended that the borrower choose the lower upfront insurance premiums at time of closing with a slightly higher per month premium due thereafter.

Do I have to pay mortgage insurance if I have less than a 20% down payment for a home?
No. There are several ways to avoid private mortgage insurance premiums.
The first is to purchase a home with a combination first and second mortgage. The first mortgage would be limited to 80% of the home's appraised value. The second mortgage, which would close in conjunction with the first, would then provide for the difference between the home's purchase price, less the 80% first mortgage, less the down payment available . In other words, if you have a 10% down payment available, your first loan would provide for the 80% mortgage with a second mortgage of 10%. This is commonly referred to as an 80 -10 -10 transaction.

Another way to avoid incurring MI payments is to find a lender that offers self-insured programs. This type of loan would have a higher interest rate in place of the private mortgage insurance premium. While mortgage insurance premium payments are not tax deductible, the interest associated with a self-insured mortgage would be fully tax deductible.

The decision of whether to obtain a loan with mortgage insurance versus the above two options should take into account the combined total monthly payments of the various options, adjusted for the tax benefits of interest deductions.

Once my loan to value ratio drops below 80%, can the MI be removed?
Yes. Lenders will allow borrowers to remove the MI requirement once the property's appraised value increases such that the loan to value ratio is below 80%. The reality of trying to accomplish this can be somewhat challenging. Usually the lender will require that an appraisal be done by the lender's approved appraisal companies. Contact your current mortgage holder to determine their policy on removing mortgage insurance from an existing loan.

Another means to remove the MI is to refinance the original mortgage with the higher appraised value used to determine the new loan's loan to value ratio. However, if the current first mortgage held b

When you think your home has appreciated to the point where you have enough equity to cancel your monthly PMI (Private Mortgage Insurance) payments - what do you do next?

You're not the only person to ask this question.  With the advent of 95%, 97%, and even 100% purchases, more and more people are putting less money down and counting on future appreciation.  That's about 1.5 Million homeowners in 1999.

Keep in mind that you need 20% equity to proceed.  There is a quick way to do this calculation:

Multiply your current loan balance by 1.25.  Your home has to be worth at least this much to legally get rid of the $40 to $120 premiums you pay every month.  

The 20% in equity can be earned by paying down the mortgage over time, appreciation, or home improvement.

Or of course by refinancing your loan.  Then the LTV (and PMI amount) is based solely on the appraised value and new loan amount, which makes a lot of sense if rates are lower now than your current rate, or if you PMI amount drops enough.
Or you can consider re-structuring your loan so you will not have PMI.

Why does PMI exist? 
Lenders have determined that those with more than 20% equity are less likely to default on the mortgage.  PMI allows homeowners to purchase a home with less than 20% down by insuring the lender against default.  

If not for PMI, everyone would be required to put at least 20% down on the mortgage. 

What has changed, I hear it's hard to get rid of PMI?
The Private Mortgage Insurance act took effect in July of 1999.  It gives homeowners a number of rights.

1) Lenders have to give you a written statement explaining that you have PMI and when you'll be allowed to cancel it.
2) The lender must allow you to cancel PMI when your equity is 22% or more.
3) And you can ask for permission once your equity reaches 20%.

The new law only affects new mortgages funded after July, 1999, but Fannie Mae and Freddie Mac have said they will apply the new rules to the older loans.

First Step - what is my home worth?
For a start, you can find online home valuation estimations on the web and get a rough sense of what your home is worth.  But sometimes the web sites can be off the mark.  And most importantly, these valuations are not acceptable for PMI cancellation purposes by the largest owners of PMI-insured mortgages - Fannie Mae and Freddie Mac.

Homeowners can also contact a local appraiser and ask whether they do "PMI Cancellation Consultations."  Some local appraisers will do a quick check for you for a small fee.  BUT, that will only tell you if you're in the ballpark.  The good news is that most of these appraisers will credit that small fee towards the full appraisal you'll need to cancel PMI.

I think my home is worth enough, what do I do next? 
To qualify for the cancellation, you'll have to demonstrate to the lender that the property is as valuable as you think it is.  
Don't hire someone and pay for a full appraisal before contacting the lender that services your loan.  

Under Fannie Mae and Freddie Mac rules, it is the lender-servicer, not the homeowner, who much choose the appraiser.  If you pay $300 for an appraiser, you're gambling that the servicer will accept that appraisal.  Fannie Mae requires that all of it's PMI Appraisals be ordered by its servicers from it's network of approved appraisers.

Request in writing to your current lender-servicer that the PMI be cancelled, and ask them to order an appraisal to verify the equity if you are depending on appreciation or home improvement to earn the equity.  If you have paid on the mortgage to such a point that you have 20% in equity, they can cancel without an appraisal in some cases. 

When can't I cancel PMI? 
The new laws apply to loans funded after July of 1999.  However, Fannie Mae and Freddie Mac have said they would honor the new laws on the old loans.  However, you need to review your loan document with your lender, some lenders require 25% equity.

FHA loans are not required to drop PMI under the same rules as conforming loans - if you have an FHA loan - expect to keep paying PMI for at least 5 years AND until your LTV is less than 78%.  Refinancing may be the best option for you.

Payment history is very important.  If you have a payment more than 30 days late in the past year, or a payment more than 60 days late in the past two years, the lender is not required to drop PMI. 

If you have a second mortgage or Home Equity Loan that makes the LTV of the first and second mortgage more than 80%, the lender is not required to drop the PMI. 

To Recap: 
1) Determine the estimated value of your home, and make sure it's enough to qualify.  
2) Contact the lender to whom you send your payments each month.  Ask the lender to order an appraisal to determine market value.  Keep all notes in writing.  
3) You need to keep an eye on your equity to determine when you can get rid of PMI, you are the person that cares the most about eliminating PMI.  
4) Consider applying the extra money you've saved towards the mortgage to pay the loan down faster.
5) Consider refinancing, or re-structuring your loan so you will not have PMI.


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Mortgage Insurance Rates Increasing on FHA Loans

Mortgage Insurance Rates Increasing on Kentucky FHA Loans

Mortgage Insurance Rates Increasing on Kentucky FHA Loans


FHA Mortgage Insurance Rates Will Be Going Up on All New Kentucky FHA Loans Assigned April 9, 2012 and After.
Kentucky FHA Loans are loans insured by the Federal Housing Administration (FHA). These insured loans minimize the risk lenders face by allowing buyers a down payment less than 20% of the price of the home. Kentucky FHA Loans offer features that are attractive to many home buyers such as:
  • Low Down Payment – as low as 3.5% of the purchase price of the home
  • Low Closing Costs – closing costs, mortgage insurance and other fees can be included in the loan
  • Easier Credit Qualifications – those who don’t have the credit score or history to qualify for a conventional loan may qualify for FHA financing
Because Kentucky FHA loans allow a down payment of less than 20% of the purchase price of the home, mortgage insurance is required for these loans. Mortgage insurance premiums on Kentucky FHA loans are much less than premiums for private mortgage insurance and most of the premium can be added to the loan. For FHA loans, a portion of the Mortgage Insurance Premium (MIP) known as the Up Front Mortgage Insurance Premium (UFMIP) is added to the loan balance rather than being paid out-of-pocket at closing. Then, the remaining portion of the MIP due is added to the monthly payment.
While FHA mortgage insurance premiums will continue to be lower than premiums for private mortgage insurance, FHA mortgage insurance rates will be going up on all new loans assigned April 9, 2012 and after. The UFMIP rate, which is included in the loan, will change from 1.00% to 1.75% of the loan amount. The MIP rate will change from 1.15% to 1.25% of the loan amount. Here is an example of how these changes will impact a loan for $400,000*:
New FHA Loan
(After April 1, 2012)
Old FHA Loan
(March 31, 2012 or prior)
Purchase Price
Down Payment %
Down Payment Amount ($)
Interest Rate
Up Front Mortgage Insurance Rate
Mortgate Insurance Rate
Tax Rate
Loan Amount
Payment 1
MI Payment
Total Payment
Taxes Monthly
Insurance Monthly
Other (HOA Dues)
Total Monthly Payment

In the example above, the monthly payment goes up $50 per month. These changes can be compared as having a net effect of raising the interest rate of the loan by .25%. To buy down the interest rate by .25% to get the payment more in line with the former FHA insurance rates would cost about $8,000 out-of-pocket.
If you are planning to purchase a home using FHA financing, save money by purchasing your new homebefore April 1, 2012 to meet the April 9, 2012 deadline for the change in mortgage insurance premium rates.

*This purchase scenario is used for demonstration purposes only and may not be available at any or all communities.  This information is provided for general awareness only, and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind.

With the new FHA Streamline Refinance program – and the recent changes in the FHA PMI rates – we’ve had several people ask, “When Can I Cancel and Get Rid of FHA Mortgage Insurance Premium?”
The good news is that unlike the USDA Loan Program (that also saw recent changes to it’s PMI rates) you actually CAN “get rid of FHA PMI!” :)
You have two types of Mortgage Insurance (PMI) with FHA.  The Upfront fee that is charged can be partially rebated if you refinance or sell within 5 year of getting the home.  The “Monthly” charge is what you can stop paying.  This charge is “technically” called FHA MIP (mortgage insurance premium) but since it’s just kinda symantics – we refer to it all as FHA PMI.

FHA differentiates between a 30 year and 15 year fixed loan as to  when you can cancel your FHA PMI :
  • 30 Year Loan Term – must pay the monthly insurance premium for a minimum of 60 months (5 years) and the loan must reach 78% loan-to-value (LTV) as a result of paying the loan down (amortization).  LTV is not determined by the new home value, it’s determined by the original sales price of the home.  LAYMAN’S TERMS:  If your original sales price was $100,000 – multiply that by 78%.  You need to get your mortgage balance down to $78,000 before FHA will allow you to drop the PMI.
  • 15 Year Loan Term – there is NO requirement that MIP be paid for 60 months but the LTV must be 78%.  LTV is based on paying the loan balance down, you calculate this the same way you do for a 30 year mortgage.  Remember, this is NOT based upon the current appraised value or the current tax value of the house.
How Can I Determine When I Will Reach 78% LTV?
There is no set number of months it will take because it varies slightly based on the interest rate and size of the down payment. If you use Excel – you can easily find an amortization program that will tell you when your mortgage will be at the “sweet spot!”  For a 30 year mortgage with 3.5% down, it will take between 9-10 years to get down to 78% LTV.
A 15 year fixed mortgage will pay down to 78% LTV between 2-2.5 years.  Remember, FHA does not require 15 year loans to keep the annual MIP for a minimum of 60 months.
How to Remove or Cancel FHA PMI Quicker
It is possible to eliminate or get rid of the FHA mortgage insurance premium quicker if you make extra payments to the principle, but only after 60 months has passed (assuming you have a 30 year loan).  FHA goes off the scheduled amortization schedule to determine when you will reach 78% LTV up until 60 months.
Refinance -If you you think you have 20% equity in your home but don’t meet the 60 months or 78% LTV based on the original purchase price or appraisal criteria, it may be possible to refinance into a conventional loan.  If you don’t have 20% equity, and have VA loan eligibility, you could refinance into a VA loan.  A VA loan requires no monthly mortgage insurance and we can go up to 100% LTV on a VA refinance.
Can I Cancel FHA PMI if My Home Upside Down in Value?
It might not seem logical – but if you’ve been in your home for 5 years… and you’ve paid it down based upon the ORIGINAL sales price to the 78% mark, you can cancel the FHA PMI you are charged on a monthly basis… even  if you’re home is upside down in value.
How Do I Cancel My FHA PMI?
This is the easy part….FHA automagically drops the monthly FHA PMI based on the amortization schedule.  You don’t have to order an appraisal and technically, you don’t even have to request the removal.  However, if we suggest contacting your servicing bank to make sure they are aware of  your projected date for your PMI removal!


Joel Lobb
Senior  Loan Officer

American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223

 phone: (502) 905-3708
 Fax:     (502) 327-9119

 Company ID #1364 | MB73346

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