Is PMI Waivable on an FHA Loan?
A common question arises among those with FHA (Federal Housing Administration) loans: is it possible to waive or cancel Private Mortgage Insurance (PMI) on an FHA loan? The answer, as it turns out, depends on several factors, including the date of loan origination and the current status of the mortgage.
Loan Origination Before June 3, 2013
If your FHA loan was originated prior to June 3, 2013, there are certain conditions you must meet to potentially have your Private Mortgage Insurance (PMI) canceled. Here’s a breakdown of the requirements:
Your mortgage must be current and in good standing. You have made at least 5 years of payments if you have a 30-year mortgage (no requirement for a 15-year mortgage). Your mortgage balance should be at or below 78% of your last FHA-appraised value. This could be the original purchase price.Once these criteria are met, you should contact your lender and request that they cancel the FHA Private Mortgage Insurance (PMI).
Loan Origination After June 3, 2013
For FHA loans that were originated after June 3, 2013, the process is significantly different. In these cases, the possibility of removing PMI is limited, as FHA loans with post-2013 origination dates typically have non-cancellable FHA Private Mortgage Insurance (PMI). According to the Department of Housing and Urban Development, mortgagee letter HCL-13-01 explains this rule in more detail.
The reasoning behind this is that after June 3, 2013, FHA loans were designed to require permanent private mortgage insurance, regardless of the loan-to-value ratio or the borrower’s payment history.
About FHA Mortgage Insurance (MMI)
It's important to note that the Private Mortgage Insurance (PMI) on an FHA loan is actually Mutual Mortgage Insurance (MMI), which is a public insurance program. This MMi is distinct from private mortgage insurance, as the name suggests.
Unlike private mortgage insurance, you cannot buy out or “waive” FHA mortgage insurance. The factors that determine the cost of MMI are based on the specific criteria of your FHA loan. If you are looking to remove the mortgage insurance, the only option is to refinance into a conventional loan that does not have this requirement.
Conclusion
In summary, for most FHA loans, particularly those originated before June 3, 2013, you may be able to have your PMI (actually called MMI) canceled under certain circumstances. However, for loans originated after this date, the option to cancel PMI is extremely limited. If you are considering refinancing to eliminate either PMI or MMI, it's advisable to contact your lender for more detailed information on the specific requirements and processes involved.