Can You Remove PMI from an FHA Loan? A Guide for 2024

Private mortgage insurance (PMI) is a necessary evil for many homebuyers While it allows you to buy a home with less than 20% down, it also adds to your monthly payments So naturally, most buyers want to get rid of PMI as soon as possible.

But what if you have an FHA loan? Can you remove the mortgage insurance, or are you stuck paying it for the life of the loan?

The short answer is yes, you can remove PMI from an FHA loan. But it isn’t as straightforward as with a conventional loan. Here’s what you need to know about canceling MIP on an FHA mortgage in 2024.

When Can You Remove PMI from an FHA Loan?

Whether and when you can cancel FHA MIP depends on two key factors

When you originated the loan. FHA guidelines for removing MIP have changed over the years. The newer your loan, the better chance you have.

Your current loan-to-value ratio. FHA MIP can’t be removed until you reach 78% LTV through payments and appreciation.

Let’s take a closer look at how these factors work:

FHA Loans Originated Before July 1991

If you originated your loan prior to July 1991, you’re likely stuck paying MIP for the entire loan term. FHA didn’t offer any options for MIP cancellation before then.

Refinancing to a conventional loan is your only option to remove mortgage insurance.

FHA Loans Originated July 1991 to January 2001

FHA loans originated during this period allow MIP cancellation once you reach 78% LTV. This happens automatically when you hit the 78% threshold.

Refinancing is still an option if you want to remove MIP sooner.

FHA Loans After January 2001

FHA loans issued after January 2001 follow the same 78% LTV rule for canceling MIP. However, you may also request cancellation after just 5 years if your upfront MIP was financed into the loan.

Either way, reaching 78% LTV is key for automatic removal of MIP.

FHA Loans After June 2013

Here’s where it gets more complicated. For FHA loans issued after June 3, 2013, MIP cancellation depends on two factors:

When you reach 78% LTV ratio – This remains the standard threshold for automatic cancellation for all FHA loans. However…

Your down payment amount – Loans with less than a 10% down payment require MIP for the life of the loan. Only those with 10% or more down qualify for cancellation at 78% LTV.

The takeaway? If you put down less than 10%, you’re stuck paying MIP for the entire loan term, no matter how much you pay down the mortgage.

How to Cancel MIP on FHA Loans

Now that you know the cancellation rules, here are the steps to actually remove MIP from an eligible FHA loan:

1. Request cancellation in writing – Once you hit 78% LTV or meet other qualification rules, you must request MIP cancellation in writing to your mortgage servicer. It is not automatic.

2. Obtain an appraisal – The servicer will likely require an appraisal to confirm your home value and current LTV ratio. You may have to pay for this appraisal.

3. Receive confirmation from servicer – After reviewing your request and documentation, the servicer will provide written confirmation of MIP cancellation and the exact date it will take effect.

4. Start saving – Your monthly mortgage payment will go down starting on the cancellation date as MIP is removed. Make sure to add these savings to your budget.

And that’s it! As long as you meet eligibility requirements, the process is fairly straightforward. Just make sure to stay on top of your LTV and request cancellation as soon as you’re able.

Alternatives for Removing FHA Mortgage Insurance

What if you don’t qualify to cancel MIP on your current FHA loan? You still have options to remove the added expense:

1. Refinance to a conventional loan – This allows you to trade your FHA mortgage for a new loan with no MIP. You will need enough home equity to get approved.

2. Refinance to a lower LTV FHA loan – If you have equity, you may be able to refinance into a new FHA loan at a lower LTV, meaning lower monthly MIP.

3. Apply for HUD hardship exemption – In rare cases, you can apply to cancel MIP due to financial hardship. This is difficult to obtain.

4. Sell and buy a new home – If all else fails, moving to a new home you can qualify for with 20% down is an option. Just make sure you can recoup closing costs.

Refinancing is typically the most practical route if you don’t qualify for removal of FHA MIP under current guidelines.

Key Takeaways on Canceling MIP with an FHA Mortgage

To recap what we’ve covered on removing mortgage insurance from an FHA loan:

• FHA MIP cancellation is based on when you originated the loan and your current LTV ratio
• Loans after June 2013 require at least 10% down to qualify for MIP removal
• You must proactively request cancellation once eligible; it is not automatic
• Most borrowers remove MIP by refinancing into a conventional loan or lower LTV FHA loan

The rules are admittedly frustrating. But with strategic planning and diligent saving, you can position yourself to shed FHA MIP and the added monthly expense.

At mymortgageinsider.com, we can help you analyze the best options and timeline to accomplish this goal. Our mortgage experts know all the intricacies of FHA loans and mortgage insurance guidelines.

We’re here to provide trusted guidance tailored to your unique financial situation. Give us a call today to start mapping out a personalized plan to remove PMI from your FHA home loan.