[quote=j]I believe there is no PMI on FHA loans.[/quote]
It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.
The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.
In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).
