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post #1 of 22 (permalink) Old 05-08-2008, 12:30 PM Thread Starter
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Private Mortgage Insurance?

We are refinancing our house into a FHA loan which requires PMI. From what I understand we can either go with the PMI company that is selected for us or we have five days from the signing of the loan to shop around for the PMI company we want to go through. Does anybody have any suggestions? I am unfamiliar with these types of companies and dont know where to start. It would be nice to lower the payment, but if not, maybe find one with benefits on our end and not just the loan company.

Also can anyone explain to me exactly how escrow works regarding the 3 month prepay for taxes and insurance. This is also new to us because we didnt have this on the last loan.

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post #2 of 22 (permalink) Old 05-08-2008, 12:37 PM
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I don't think it is worth the time to shop for PMI. Take what they give you. The PMI is tax deductable in most cases.

A portion of your payment goes into escrow (as holding account) each month to pay your tax bill and insurance bill for you. They want you to start out with 3 months to make sure there will be enough in there to pay those items when they come due.

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Okay, thats what I was wondering on the PMI. I know whatever company they choose gives them kickback, so I assume they pick the company with the most kickback that might not be the best.

So you are paying three months ahead or three months backwards? Thats what I dont understand. If you are paying three months ahead, then would the first three mortgage payments be lower? Where does that money go?

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post #4 of 22 (permalink) Old 05-08-2008, 01:26 PM
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Your putting money into an account for your future taxes/insurance. When your pay your monthly escrow it replenishes that account so the next bill can be paid. They want 3-6 months just so they have a buffer.

PMI honestly there are only a few (MGIC) is usually a good one but they are all talking to each other. And if your going FHA then your paying 1.5% of the loan up from for MIP. Basically what it means is your giving them the PMI up front and your actual PMI payment will be reduced.

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post #5 of 22 (permalink) Old 05-08-2008, 02:41 PM
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PMI sucks I refied to get rid of it, whew its money down the drain...

As soon as you can get rid of it..

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post #6 of 22 (permalink) Old 05-08-2008, 02:46 PM
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Originally Posted by FiReBReTHa View Post
Okay, thats what I was wondering on the PMI. I know whatever company they choose gives them kickback, so I assume they pick the company with the most kickback that might not be the best.

So you are paying three months ahead or three months backwards? Thats what I dont understand. If you are paying three months ahead, then would the first three mortgage payments be lower? Where does that money go?

I was a Loan Officer for 4 yrs.... PMI and T&I Escrow are two totally different things and as far as PMI, just go with whoever it's setup with it's all the same.... Fannie May or Freddie Mac approvals is what regulates the "PMI FACTOR" anyway.... It doesn't matter who services it.
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post #7 of 22 (permalink) Old 05-08-2008, 02:48 PM
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PMI sucks I refied to get rid of it, whew its money down the drain...

As soon as you can get rid of it..

You can possibly go with a "Lender paid MI" option but your Rate wont even be CLOSE to what you probably got. It's worth paying MI in Hi CLTV situations.... pay it down and refi out of it in the future once you've appreciated a bit in value and paid down some of your PRINICIPAL balance.
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post #8 of 22 (permalink) Old 05-08-2008, 02:49 PM
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PMI sucks I refied to get rid of it, whew its money down the drain...

As soon as you can get rid of it..
Depends on the cost to refi. You can petition to have a PMI removed after 12 months. So if your PMI is $98 a month ($1176 for the year) and it costs you $1400 or more to refi, you have to decide it that is worth it or if you are saving money somewhere else like in the rate. Being able to skip a payment doesn't really count as saving money because you are paying interest one way or another.

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post #9 of 22 (permalink) Old 05-08-2008, 02:50 PM
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Do you still need PMI if you are financing 80% or less of the value these days?

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post #10 of 22 (permalink) Old 05-08-2008, 02:51 PM
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Do you still need PMI if you are financing 80% or less of the value these days?
As far as I know, no.

Also, you can avoid a PMI by setting up two loans. For example, you only have 5% to put down so you set up an 80% loan and a 15% loan.

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post #11 of 22 (permalink) Old 05-08-2008, 02:53 PM
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Do you still need PMI if you are financing 80% or less of the value these days?
Negative! thats the only reason PMI exists "LENDER RISK >80%"
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post #12 of 22 (permalink) Old 05-08-2008, 02:55 PM
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In addition...... Most if not all LENDERS will allow you to remove PMI from your Loan aggreement/contract WITHOUT refinancing, most will require an appraisal report done to confirm that current balance doesn't exceed current value by more then 80% and as long as this is the case it will be removed....

IE..... NO REFI NECCESARY.....
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post #13 of 22 (permalink) Old 05-08-2008, 04:06 PM Thread Starter
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We are doing the pmi this time around, because we had an 80/20 loan that was horrible. We are very happy with the FHA loan we are refi'ing to and are more than happy to pay the PMI compared to the junk we were paying before. We got a good interest rate and will now actually have a chance to actually pay down some principal.

Its good to know that I dont have to shop around for a different PMI company. I will stick with what they give me through Fannie Mae.

We wont be seeing 80% for awhile, so that PMI will stick with us either until we move or the value of our home goes up, which I am not expecting.

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post #14 of 22 (permalink) Old 05-08-2008, 04:10 PM Thread Starter
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Your putting money into an account for your future taxes/insurance. When your pay your monthly escrow it replenishes that account so the next bill can be paid. They want 3-6 months just so they have a buffer.

PMI honestly there are only a few (MGIC) is usually a good one but they are all talking to each other. And if your going FHA then your paying 1.5% of the loan up from for MIP. Basically what it means is your giving them the PMI up front and your actual PMI payment will be reduced.
So since we are having that money rolled into the loan, basically, we arent ever seeing that again, until we either refi or move? That sucks. I know with FHA loans we have to roll the taxes in to the payment, but do we have to roll in home insurance also? I would rather not.

So our PMI payment will reduce overtime as we keep paying the balance down?

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post #15 of 22 (permalink) Old 05-08-2008, 04:19 PM
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I know with FHA loans we have to roll the taxes in to the payment, but do we have to roll in home insurance also? I would rather not.

So our PMI payment will reduce overtime as we keep paying the balance down?

-Eva

You will pay a slightly higher APR if you don't escrow the insurance.

No, your PMI will not reduce over time. And you don't need to be at 80% to have it removed. You need to pay on time for 12 months and then ask to have it removed.

And most likely your property taxes will go up, that is why they need that cushion. And that is correct, you will get any surplus back if you refi or pay off the loan (ie sell the house).

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post #16 of 22 (permalink) Old 05-08-2008, 04:42 PM
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As far as I know, no.

Also, you can avoid a PMI by setting up two loans. For example, you only have 5% to put down so you set up an 80% loan and a 15% loan.
We asked to do this but the lender said that the higher interest rate on the second loan is more than just paying PMI on one loan, and put us in an FHA as well.

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post #17 of 22 (permalink) Old 05-08-2008, 04:42 PM Thread Starter
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[QUOTE=jrock;1104852]
No, your PMI will not reduce over time. And you don't need to be at 80% to have it removed. You need to pay on time for 12 months and then ask to have it removed.
QUOTE]

Wow, thats awesome, I didnt know that. Very good info. Although, I am sure just because you ask, doesnt mean they will say yes.

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post #18 of 22 (permalink) Old 05-08-2008, 05:18 PM
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You will pay a slightly higher APR if you don't escrow the insurance.

No, your PMI will not reduce over time. And you don't need to be at 80% to have it removed. You need to pay on time for 12 months and then ask to have it removed.

And most likely your property taxes will go up, that is why they need that cushion. And that is correct, you will get any surplus back if you refi or pay off the loan (ie sell the house).
Mortgage insurance on an FHA is required I believe and can't be removed with a refi. My mortgage is with National City and is an FHA... I spoke to the mortgage guy a few years ago when my home value was WELL over what is required to remove PMI on most mortgages (never had a late payment a day in my life) and was told that this is NOT how FHA loans work...the insurance is mandatory regardless, and the only way to remove it is by doing a refi. I really never questioned it but if this IS true, then I would be hesitant to do an FHA on a refi.

All I know is that FHA loans pretty much stink now. Before they were the easiest way to get into a home for first time home buyers with less than a 20% down payment. Now you have to come up with 1.5% of the loan upfront, escrow money, plus whatever down payment or ernest money you put on a house.

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post #19 of 22 (permalink) Old 05-08-2008, 05:50 PM
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FHA loans are back in vogue again due to the recent credit crisis. If you are putting less than 10% with a CB score under 720, FHA may be the way to go.

Banks have really cut back on piggy back programs like the 10/10/80 and the 5/15/80 to avoid PMI. If you can avoid it I would but you must compare the overall cost and rates on both packages.

I do not believe you can remove PMI insurance on FHA loans without a refi. Some of the terms of FHA loans may suck but it is the best way for some people to get in to a house.

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post #20 of 22 (permalink) Old 05-08-2008, 06:18 PM
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No, your PMI will not reduce over time. And you don't need to be at 80% to have it removed. You need to pay on time for 12 months and then ask to have it removed.
I have had my home loan for almost two years. Paid every month on time, and always paid more than the minimum. If I understand you correctly even though I do not have 20% of my home paid for, I can call the bank and have them remove the PMI?
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post #21 of 22 (permalink) Old 05-08-2008, 06:59 PM
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I have had my home loan for almost two years. Paid every month on time, and always paid more than the minimum. If I understand you correctly even though I do not have 20% of my home paid for, I can call the bank and have them remove the PMI?
Only if your home appraises out and your under 80% of what the house is worth. If your not under 80 then no. Its just wasted money on an appraisal. Regardless of paying more than the minimum unless your dropping an extra $500-$1000 most likely the answer is no.

Reason why is because the other problem eveyrbody is running into now is the housing market is a depreciating market all over IL. So banks are cutting everything due to it.

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post #22 of 22 (permalink) Old 05-08-2008, 07:11 PM
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Depends on the cost to refi. You can petition to have a PMI removed after 12 months. So if your PMI is $98 a month ($1176 for the year) and it costs you $1400 or more to refi, you have to decide it that is worth it or if you are saving money somewhere else like in the rate. Being able to skip a payment doesn't really count as saving money because you are paying interest one way or another.

Ok soooo true story here lol I only did this for 4 years.....

FHA aka "Federal Housing Authority" Is Federally mandated and operates based on it's own set of Guidelines/Underwriting, therefore it is not tied directly to Fannie May or Freddie mac, and as others have stated a lot of times is an ideal loan for people who are a bit credit challeged and are looking to purchase homes at high values. The wash on this is that FHA is backed and insured by the government to the lender and therefore always requires MI. On another note, if you have ANYYYY FANNIE MAY OR FREDDIE MAC LOAN it WILL require PMI if over 80% Loan to Value unless you opt for "Lender paid MI" which mostly is not available on high LTV/CLTV loans. Which again Rates are obnoxious on that type of structure and most of the time the MI makes more sense.
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