Home Financing (FHA) - PMI Question?
Is it true Mortgage Insurance must be carried the full length of an FHA loan? I live in Ohio and and shopping around for home financing. I will most likely be opting for an FHA loan. One of the lenders I've been speaking with says mortgage insurance must now be carried the full length of the loan, but I had read that it can be cancelled at 80% if other terms are met. Can anyone clear this up for me?
Thanks Dan.. I realize now I had the designation mixed up. What I am asking about is MIP for FHA loans.
- Dan BLv 77 years agoFavorite Answer
I've never heard of carrying PMI for the full term and I can't find anything on the internet that supports your lender's statement.. But when you reach the 80% level (78% for some lenders), they may request an appraisal to see if the current LTV ratio is 80%. Sounds like your lender is trying to pocket some extra money.
PMI = mortgage insurance required by conventional lenders to protect them in case the borrower(s) default.
MIP = mortgage insurance required by FHA lenders to protect them in case the borrower(s) default.
MI = mortgage insurance that pays the mortgage off in full if all borrowers listed on the note die - it's a life insurance policy with the lender as the beneficiary and premiums are payable for the duration of the loan..
I think your lender is talking about MI. But for the mis-informed, it can be confusing and very expensive for the borrower. If you want MI, buy yourself a term policy - much, much cheaper and you get to name the beneficiary and your beneficiary can use the money as they wish. Leave your lender out of it.