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Hi all,
we are planning to get FHA loan and I was wondering If the MIP price can be negotitated with the bank?
Also, Its my understanding that there is no pre-payment penalty, but does that vary with the lender?
I plan to pay more money on the mortgage so that I can get to the 78% LTV quickly and get rid of the MIP after 5 years.
If I wanted to refinance and convert it to a conventional loan a couole of years down the road, is there like a penalty or something?
Also, can you recommend a good website that breaks down all there is to know about FHA?
Thank you very much.
Last edited by harry2010; 02-19-2011 at 07:02 PM..
Reason: Spelling mistakes
When you write "MIP price," I assume you mean the amount of the mortgage premium that you will pay.
No, it cannot be negotiated. It is set by the FHA and the calculation is found in the Code of Federal Regulations at 24 C.F.R. sections 203.260 and 203.261. The amount is one-half of one percent of the average outstanding loan balance for the first year. This amount is due when the loan is originated. Your monthly MIP is 1/12 of this annual amount.
If you plan to pay down the balance of the mortgage quickly, can you do a larger down payment? If you do 5% down, you can split your loan into a first and second lien and have no upfront MIP of 1% and you can save the montly fee which is set to increase .25 in April. Currently with 3.5% down, the monthly fee is .90(on $100,000 that is $75 per month, in April going to 1.15 which is $95.83 per month.) FHA is quickly becoming less desirable.
Also, lenders have a single premium MI, where you pay a 1 time fee and there is no monthly mortgage insurance.
Yes, no prepay penalty on FHA loans.
No penalty if you refinance in a couple years to a conventional loan.
....we are planning to get FHA loan .......
I plan to pay more money on the mortgage so that I can get to the 78% LTV quickly and get rid of the MIP after 5 years......a conventional loan a couple of years down the road, .....
Harry
Do not make to mistake not understanding - value is measured by the homes around yours, not by the loan amount. By buying down the principle to get down to 78% LTV in five years to get the MI payment lifted. It is not is easy as it seems, you have to use an appraisal company that the Lender appoints. You have to pay $45O+. He regularly works for the Lender appraising homes, if wants continued business from the Lender, he will be overly thorough....
As my father use too say to me .... you need to think what you are going do.... What you do today will make you who you are tomorrow... All the years he use to scream about the importance of credit, now I'm teaching how to repair credit and helping people rebuild their financial lives saving their homes from foreclosure.
Worked with mortgages for many years - as a Loan Officer wrote 1000's of purchases. Thought FHA loans were the best type of loan for a first time home buyer.
I have changed my opinion - FHA loans are the worst type of loan to have, especially if you have financial trouble.
Your goal by paying more into the mortgage payment is probably going to fall short. You are planning your money before you have it. In five years you will be not where you planned to be because of all the costs you didn't anticipate. The Interest rate is higher - along with the MI, the cost of a refinance, you will spend more in the future.
My advice to you is wait it out a little longer before buying a home. Saving up to put 20% down or more on a home, financing through a conventional loan. In five years you will be further ahead. No Mi fees and a lower interest rate, you will spend less in the future....
Which one is better
.....you will spend more in the future.
.....you will spend less in the future
Where do you want to be in fives years? Answer that and make that your goal. Then select the best path towards achieving your goal.
Sense a little anticipation - "a home financed with a FHA loan...then sending extra into the payment" - who told you that line, a loan officer?.....lol!!!
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Quote:
Originally Posted by Modification Specialist
Harry
Do not make to mistake not understanding - value is measured by the homes around yours, not by the loan amount. By buying down the principle to get down to 78% LTV in five years to get the MI payment lifted. It is not is easy as it seems, you have to use an appraisal company that the Lender appoints. You have to pay $45O+. He regularly works for the Lender appraising homes, if wants continued business from the Lender, he will be overly thorough....
Wholly inaccurate. The LTV calculation regarding FHA MIP always uses the lesser of the purchase price or appraised value at origination. New appraisals will not be considered. Perhaps you should consult the 4155.2. Section 7.3.d to be specific.
If you plan to pay down the balance of the mortgage quickly, can you do a larger down payment? If you do 5% down, you can split your loan into a first and second lien and have no upfront MIP of 1% and you can save the montly fee which is set to increase .25 in April. Currently with 3.5% down, the monthly fee is .90(on $100,000 that is $75 per month, in April going to 1.15 which is $95.83 per month.) FHA is quickly becoming less desirable.
Also, lenders have a single premium MI, where you pay a 1 time fee and there is no monthly mortgage insurance.
Yes, no prepay penalty on FHA loans.
No penalty if you refinance in a couple years to a conventional loan.
I am putting 20% down, but it's because of the credit, the bank wants to do FHA loan.
what does splitting the loan mean, if there is any way I can decrease MIP that would be great!
Thanks for your help.
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