FHA loans and mortgage insurance. If I buy a house this month, can I cancel it after I gain equity in the home?
Unfortunately, if you purchased the home after June 2013, you will follow under these rules:
Loans beginning at 10% down or more will pay annual MIP for 11 years.
Loans beginning at 10% down or less will pay annual MIP for the complete loan term.
This means that home buyers using FHA's 3.5 percent down payment program will pay annual mortgage insurance for the loan's full 30 years, regardless of whether the home appreciates to the point of having 22 percent equity or more.
With the FHA rules, MIP is forever.
So why get an FHA loan?? Well for one FHA is more lenient when it comes to credit score, job histories, down payment amount and credit history. Conventional financing is much more strict.
The good news? You can always try to refinance out of your FHA later when your personal situation improves.