My mortgage rep told me that I must pay FHA mortgage insurance for 5 years

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frequently asked questions



When it comes to mortgages, there are so many frequently asked questions. One mortgage topic that gets many misleading answers is mortgage insurance, specifically FHA mortgage insurance.

Why do I need FHA monthly mortgage insurance if I put 20 percent down?

Aren't FHA loans more expensive? (many refer to this because of the upfront mortgage insurance)


FHA monthly mortgage insurance will be there regardless if you put 20 percent down. If you put less than 20 percent down, you will have the FHA monthly mortgage insurance until you reach the 78 percent LTV level. (LTV = Loan-to-Value)  If you put 20 percent or more down, you will still have the monthly insurance for 5 years, guaranteed. Even if you put 19 percent down and you reach the 78 percent LTV in 3 years. This is a FHA guideline which is constant no matter what mortgage lender you use.


Comparing FHA loans with other mortgage programs, there are rumors that FHA loans are more expensive. Why do people say this?  In many cases it's because they are talking about the upfront mortgage insurance, which was reduced in October. Another reason would be because FHA raised the monthly mortgage insurance requirement back then also. If you break all of this down properly, depending on the borrowers credit scores and down payment amount, FHA loans are still cheaper in many scenarios.

Check out this scenario with 10 percent down and a credit score of 699. FHA loans vs Conventional loans with 10 percent down - What is not talked about much regarding conventional loans is it's very tough and or very expensive to get mortgage insurance on conventional loans with credit scores below 700 and or with less than 10 percent down.  Besides, Conventional loans will become more expensive come April 1st, 2011. Fannie Mae increases their pricing hits



Summary : One last thing that needs to be talked about is that you need a solid/strong loan officer who will not only be able to compare certain mortgage programs properly, but ask the right questions. An important question that gets over-looked are the borrower's goals, present and future.  I bring this up because I had a borrower who was buying a home that was worth $40,000 more than the purchase price. And by asking him the right questions, I was able to determine that he wanted a 5 year arm not only for the lower mortgage payment, but because he was planning on getting rid of the monthly mortgage insurance in less than 5 years with more equity in his property. I asked him, "what mortgage program will you be using when you refinance."  He had stated a FHA loan. Rut row... but as I mentioned above, you will still have mortgage insurance for 5 more years again, even if you refinance with 20 percent or more equity. The previous loan officer that he was shopping with and comparing me to never brought this up. Just because one loan officer might be cheaper in rate and or costs, it could still cost you thousands of dollars more when it's all said and done. Just food for thought when shopping for mortgages.


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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Comments (5)

Steve, Joel & Steve A. Chain
Chain Real Estate Investments & Mortgage, Steve & Joel Chain - Cottonwood, CA


It's wise to continue to provide this information.  Some loans have a bad "rumored reputation" and sometimes policies change. You have the solution to both of these issues. Your passion for excellence in mortgage lending  is obvious. 

Have a GREAT weekend,


Jan 29, 2011 08:57 AM
Kate Elim
Dockside Realty - Spotsylvania, VA
Realtor 540-226-1964, Selling Homes & Land a

Hi Jeff...If only borrowers would think beyond interest rates.  There are other fees that can change the cost to borrow and some don't realize this until it is too late.

It is so important to have someone that is knowledgeable about the mortgage business and has integrity to work with throughout the buying process.

It is amazing how much information you have to keep up with all of the time.


Jan 29, 2011 09:28 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX


"there are rumors that FHA loans are more expensive. Why do people say this?"

They say it because for decades it was true!

We don't buy homes in the past. Today FHA maybe your only good option and when you have the luxury of choice FHA may still be the best choice!


Jan 29, 2011 12:05 PM
Shannon Coe
exp realty of California, Inc. - Oceanside, CA
760-586-5268, San Diego Realtor

In our market FHA may be the only way to buy a home.

Jan 30, 2011 02:02 AM
Kevin Kueneke
Caliber Home Loans - Encinitas, CA
San Diego Mortgage Banker

Jeff, spot on as always.  All you have to do is run the Conv vs. FHA numbers for someone putting less than 20% down and they will see the light...especially with the upcoming additional Fannie/Freddie LLPA's.  Try getting a 90% conventioanl loan with a 660 score in a couple months...

Feb 05, 2011 05:58 PM