Can I assume an FHA loan and get the PMI dropped?

[Emily Hall]

I'm making an offer on a property (today, on a Saturday) with an assumable FHA loan with a killer interest rate (sub 3%!). I'm "assuming" I can even assume the loan to use the property as a rental (the seller has lived there for more than 1 year, so that 1-year requirement has been met, I can argue). I believe the seller's escrow portion includes PMI.

If I put 20% or more down, can I get the PMI removed without losing the stellar interest rate--meaning, can I get the PMI removed without having to refinance out of this FHA loan? Defeating the whole purpose of assuming the loan...

The loan servicer's assumption department wasn't open today to answer my questions; I want to get my offer in over the weekend. I know I can offer today and then find out for sure during my due diligence period. But I was hoping someone here knows the general answer. Thanks!

[Kevin Romines]

1 is an FHA loan assumable, Yes. 2. Can you get rid of MI by putting 20% down. No. In order to get rid of MI it would depend how long they have had the loan and under what legislation the loan was originated under. The current status of FHA is that you can get rid of MI at 11 years if the original borrower put 10% down or more at the time of purchase. If they didn't put 10% down, then MI is for the life of the loan. However there were other guidelines on FHA regarding MI prior to the current set of guidelines, hence therefore, it depends on how long this FHA loan has been in place and how much the original down payment was?

Further, if someone had 10% to put down, it would be malpractice for a loan officer to put them in an FHA loan, so its very doubtful that they did put 10% down. Call the lenders servicing dept. and get the answers?

I hope this helps?