Why would a FHA loan be required to have PMI insurance?

I am borrowing well less than half the appraised value of the home. I usually only hear of PMI being required if someone is borrowing over 80% of the homes value and then it drops off at a certain point. Why would my loan even have to have PMI and why for the entire life of the loan?


I am going from an 8.2 rate to a 6% but I am self employed and honestly don't make a tremendous amount of money. Could that be it?

Update 2:

I am doing a 30 year fixed but my loan amount is less than 28,000.oo.

Update 3:

The house appraised out at just under 57,000.oo.

Quicken was the only company that would lend me less than 50,000.00.

Update 4:

I don't really have 50% to put down per say. I just am only borrowing less than half the appraised value.

5 Answers

  • Anonymous
    1 decade ago
    Favorite Answer

    FHA or Federal Housing Authority is a mortgage insurer. If you have that great of a loan to value, there must be a low credit score or tough income. So the FHA has to ensure the lender that if you default on your mortgage, they will be paid off. Look at it like car insurance. You pay a monthly premium to have insurance or your car. If you total your car, you insurance will pay the loan off so you do not have to pay for a vehicle you do not have. FHA ensures the lender that of you foreclose, they will pay off your balance and their money is safe. The only way to avoid PMI is doing a 15 year fixed. Otherwise, you will have it for at least 7 years and your loan to value is 79% or lower. I hope that helps!

    Paul T

    Voyage Home Loans

    Sacramento CA

    Source(s): Mortgage Specialist
  • farlin
    Lv 4
    3 years ago

    confident, with an FHA very own loan you pays PMI (MIP) for a minimum of 5 years or till you attain 22% fairness (whichever is longer). With a widely used very own loan, you pay PMI in case you place under 20% down (easily, it protects the lender). With an FHA very own loan, you pays MIP (fairly plenty a similar factor as PMI) for a minimum of 5 years... in case you nevertheless don't have sufficient fairness at that factor, you will proceed to pay it. easily, that's assurance for the lender in view which you haven't any fairness interior the residing house once you place down the style of small quantity.

  • Anonymous
    1 decade ago

    PMI is for conventional Loans.. Private Mortgage Insurance.

    MIP is for FHA Loans.. Mortgage Insurance Premium.

    **Paul, above me, note the terminology.

    anyways aside of what Paul is saying it could also be that the house is upside down in value?

    what is the balance you owe vs. the appraised value..that is were your answer is going to be..

    MIP is not forever.

    **Add.. $28,000. ? Lenders hate those loans. what is the appraised value..

  • Anonymous
    1 decade ago

    FHA requires mortgage insurance for the life of the loan. Conventional loans only require mortgage insurance if there is less than 20% down.

    Why are you using FHA if you have 50% down?

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  • 1 decade ago

    The rationale: It is what it is. I suggest searching the hud.gov website.

    Try entering "FHA mortgage insurance explained" in the search box.

    It has nothing to do with the details you mentioned. It is a standard FHA guideline.

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