One of the more popular mortgage programs is offered through HUD - the FHA program. For many people, it is a good way to finance a home if you do not have much saved. It only requires a 3.5% down payment on the home, but it does come with a caveat - MIP (Mortgage Insurance Premium). There is both an upfront (1.75%) and ongoing (normally 0.55%) charge for this. The upfront fee is generally added to the mortgage, but the on-going is placed in escrow on a monthly basis. The two big surprises that many home buyers have is the added expense of MIP and Taxes at closing. For those that want to put down greater than 20% and expect it to eliminate the MIP requirement, think again. It is on the loan - no matter what - for at least the first 11 years of the term.
Is it crazy that the HUD requires MIP on mortgages that have greater than 20% down payment? Risk of loss seems to be low at that point - why charge the additional MIP on a low risk mortgage? Seems that those that want the advantages of an FHA over Conventional must subsidize those higher risk FHA mortgage holders. Perhaps HUD should consider removing the MIP requirement on those that want to finance with a greater than 20% down payment. It seems that would pressure Conventional lenders on their pricing and add to one of the many things that needs to happen to make housing more affordable.
If you need help navigating through a home purchase - search, negotiation, and financing - let do it for you - call me today - 410-271-9499.
https://www.experian.com/blogs/ask-experian/how-to-remove-mortgage-insurance-on-fha-loan/
