Local lender Mike Meena of Augusta Financial sent me a helpful guide to what buyers need to know about FHA loans NOW.
FHA charges an upfront mortgage insurance premium UFMIP of 1.75%, which they add to the original loan amount. There is also a monthly PMI charge of .85% if the loan amount is $625,500.00 or below. If the loan amount is above $625,500.00, then the PMI fee is 1.05% if it is above that amount.
FHA PMI stays with the loan for the life of the loan unless you put 10% or more down, and it would release automatically after 11 years!
PMI goes down by .05% if you put down 5% or more. If you put down 20% and get an FHA loan, you will still have PMI!
On a Conventional Loan, your rate is usually a bit higher, but PMI is generally less expensive and much easier to remove.
If you have a good credit score and are putting 5% down, you will have a PMI rate of about .27%, and with 10% down, you could be looking at a PMI rate of .14%. So you can see the rates are lower, and we are basing that on a solid score. So if your score is not super strong, you may pay a little more.
Conventional loans have higher rates on lower scores, and FHA doesn't hit you as hard when your scores are not excellent.
There are three ways to get rid of your PMI on a conventional loan, well, four if you want to get technical.
Pay your mortgage down to 78% of the original purchase price. After 2 years, if you have 25% equity based on a new appraised value and current loan amount. After 5 years, if you have 20% equity based on a new appraised value and current loan amount If you sell or refinance - LOL! Yes, that is getting technical.
I hope this is useful for you.
