Mortgage Myth Busters

My mortgage rep told me that I must pay FHA mortgage insurance for 5 years

frequently asked questions



When it comes to mortgages, there are so many frequently asked questions. One mortgage topic that gets many misleading answers is mortgage insurance, specifically FHA mortgage insurance.

Why do I need FHA monthly mortgage insurance if I put 20 percent down?

Aren't FHA loans more expensive? (many refer to this because of the upfront mortgage insurance)


FHA monthly mortgage insurance will be there regardless if you put 20 percent down. If you put less than 20 percent down, you will have the FHA monthly mortgage insurance until you reach the 78 percent LTV level. (LTV = Loan-to-Value)  If you put 20 percent or more down, you will still have the monthly insurance for 5 years, guaranteed. Even if you put 19 percent down and you reach the 78 percent LTV in 3 years. This is a FHA guideline which is constant no matter what mortgage lender you use.


Comparing FHA loans with other mortgage programs, there are rumors that FHA loans are more expensive. Why do people say this?  In many cases it's because they are talking about the upfront mortgage insurance, which was reduced in October. Another reason would be because FHA raised the monthly mortgage insurance requirement back then also. If you break all of this down properly, depending on the borrowers credit scores and down payment amount, FHA loans are still cheaper in many scenarios.

Check out this scenario with 10 percent down and a credit score of 699. FHA loans vs Conventional loans with 10 percent down - What is not talked about much regarding conventional loans is it's very tough and or very expensive to get mortgage insurance on conventional loans with credit scores below 700 and or with less than 10 percent down.  Besides, Conventional loans will become more expensive come April 1st, 2011. Fannie Mae increases their pricing hits



Summary : One last thing that needs to be talked about is that you need a solid/strong loan officer who will not only be able to compare certain mortgage programs properly, but ask the right questions. An important question that gets over-looked are the borrower's goals, present and future.  I bring this up because I had a borrower who was buying a home that was worth $40,000 more than the purchase price. And by asking him the right questions, I was able to determine that he wanted a 5 year arm not only for the lower mortgage payment, but because he was planning on getting rid of the monthly mortgage insurance in less than 5 years with more equity in his property. I asked him, "what mortgage program will you be using when you refinance."  He had stated a FHA loan. Rut row... but as I mentioned above, you will still have mortgage insurance for 5 more years again, even if you refinance with 20 percent or more equity. The previous loan officer that he was shopping with and comparing me to never brought this up. Just because one loan officer might be cheaper in rate and or costs, it could still cost you thousands of dollars more when it's all said and done. Just food for thought when shopping for mortgages.





follow Jeff Belonger on Twitter


The FHA Expert's fan page on Facebook     Add Jeff Belonger to your network @ LinkedIN

                                                                            FOLLOW ME ON FACEBOOK



- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -


Experience & Knowledge at its BEST !!!



Follow me on:

Mortgage Myth Busters



For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!



For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors


Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Comment balloon 5 commentsJeff Belonger • January 29 2011 04:38PM
My mortgage rep told me that I must pay FHA mortgage insurance for 5…
When it comes to mortgages, there are so many frequently asked questions. One mortgage topic that gets many misleading answers is mortgage insurance specifically FHA mortgage insurance Why do I need FHA monthly… more
Have mortgage questions? Keep getting different answers? Ask a…
Mortgage Myth Busters Have a mortgage question and keep getting conflicting answers and or information? I get Trulia alerts for my state and about 70% of the time, there are both loan officers and or realtors… more
The state of real estate. Lake Co FL January, 2011
Amid much talk about a real estate "double dip", shadow inventory, and a continuing crush of foreclosures; the market seems to be reacting with a mind of its own. Here in the middle of Florida, a state hit hard by foreclosures, we are… more
Who should I get my closing cost figures from prior to settlement?
My Lawyer seems to be avoiding me when I ask for my total closing costs…. should I proceed with caution? I am all about transparency and making sure that I provide the correct answers. I know most of us want to be helpful, but… more
Sure I could just QUOTE you a rate, but it probably won't be accurate
Sure I can just QUOTE you a rate, but it probably won't be accurate. Will that be acceptable to you? Of course not! This post is sparked from a recent email inquiry I received. The email asked for a 3. 5% rate on a 30 year mortgage. Thats right… more
I said JUMP - It's the best time to buy a home now!!!
I had written a blog post a few weeks ago, Conventional Pricing Adjustments coming in April in which I talked about how FHA had raised it's monthly mortgage insurance premiums back in October and how Fannie Mae will be adding onto… more
Interest Rate is the Wrong Reason to Choose a Lender
I rarely reblog… but what an excellent post by Phil Faranda.. I have been in the mortgage industry for 18+ years and have lost my fair share of borrowers to lower interest rates quoted. I usually follow up and find that the loan… more
Reputation Architecture: How to multiply the effects of 'Remarkable…
Jon Washburn in my opinion, write this excellent post that is very thought provoking and actually makes you think out of the box. As some of you know, I am big on transparency… and think many have changed the real true meaning of… more
FHA Loans vs Conventional Loans – Comparing 10 percent down – Part 1…
Can I get a mortgage with less than 5% down and credit scores of 640? Yes, with a FHA loan you can and it would be cheaper than with a conventional mortgage. There are still rumors that FHA loans are more expensive. This is a… more
Important Tax info if you bought a home in 2010
With 2010 behind us, there are many tax related considerations for those fortunate enough to have bought last year. From property taxes to income taxes and even home buyer tax credits- purchasing a home can have a huge positive effect on your tax… more