PMI with an FHA loan

Winchester, KY · Member since 2016 · 12 posts · 4 votes

I'm not sure if this qualifies as creative nonetheless... just a curious question can someone with an FHA loan also use PMI on TOP of the loan??

The reason why I am asking is because I'm looking at fourplexs in my area and it seems the average price is $ 200,000. The the lowest downpayment FHA loans allow is 3.5%), so I would need $ 7,000 cash not including closing cost. Saving around 10,000 would take me twos so if I'm able to get by with a lower down payment I will gladly do so..

I understand concerns that the lower the down payment the bigger your mortgage and that banks offering low money down loans partly caused the recession.... But I don't believe those risk apply to me because I plan be an owner occupant, I have a pretty good credit score (720) and a combine income with my spouse of 70K (no children yet).

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Matt Turbitt

Grove City, OH · Member since 2016 · 167 posts · 66 votes

10y

Just to clarify a little, with an FHA loan there is upfront pmi AND monthly pmi. With a conventional (non fha mortgage) you can put between 5%-19% down (depending on lender) and you'll only have monthly pmi.

I'd encourage you to sit down with a few lenders, it can be a little intimidating at first expecially when your not ready to buy yet but it's really the best time. Explain when your goals are and have them walk you through what it would look like and what's needed to get there and what the finances would look like.

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Matt Turbitt
Grove City, OH · Member since 2016 · 167 posts · 66 votes
10y
I'm not sure what you mean by 'use pmi on top of the loan'. Are you asking if you can roll the upfront pmi into the loan?
There should be down payment assistance programs in your area that may be worth looking into to. The other thing is you may want to look at some smaller places, maybe a duplex. The issue you are going to run into if your lender hasn't told you already having the 3.5% is only part of the equation. Then your going to have closing costs, and $3500 in upfront pmi on an fha loan, and they will want to see you have 3-4000 in reserves in an account somewhere so your not maxing yourself out then most insurance companies will want the first year in advance so there's another 1000$.
I know it's probably not what you'd wanna hear but I'd suggest finding something cheaper, and looking into lenders that offer a 5% down non-fha product, or portfolio lenders that will give you options like 5% down and interest only for a bit.
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Anthony Lee
Insurance Agent · West Long Branch · Member since 2015 · 206 posts · 64 votes
10y
Originally posted by @Matt Turbitt:

"...insurance companies will want the first year in advance so there's another 1000$..."
Insurance companies generally like when it is paid in full. However, there are usually options. If the carrier does not directly offer a multi-pay plan, there are various premium finance companies that will generally allow for payments to be spread out. In this particular case, it will be owner occupied and it would be unusual, in most markets, for the mortgage billed option to not be available.
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Thomas Clark
OP
Winchester, KY · Member since 2016 · 12 posts · 4 votes
10y
Thanks guys. So in sum a downpayment does not include all the cash onhand you are required to have.
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Jassem A.
Investor · PA · Member since 2013 · 1k+ posts · 602 votes
10y
Should be able to ask the seller to pay 3% in closing costs
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y
So if you are having trouble coming up with cash, structure the deal so the sellers net proceeds are the same but they pay some of the closing costs. For instance if you have agreed on a sales price of $200,000....see then if the seller is willing to adjust and go for a deal of $206,000 with a $6,000 seller subsidy. This will decrease the amount of your out of pocket expenses.
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Thomas Clark
OP
Winchester, KY · Member since 2016 · 12 posts · 4 votes
10y
Thanks guys. I've been doing a lot of reading along the way and although informational I feel as no book truly illustrates the amount of money you need to have up front to purchase your first property AND/OR methods or programs you could use to help offset some of those cost. But you all have led me straight.
*Also thanks for the advice regarding PMI, I was not aware that most companies want you to pay it all up front I assumed that all PMI deals just added an extra $100 or $200 to your mortgage.
Thanks Matt. You are right should probably look cheaper which is fine by me, $200,000 is the in the upper range end of my market anyways.
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Matt Turbitt
Grove City, OH · Member since 2016 · 167 posts · 66 votes
10y
Just to clarify a little, with an FHA loan there is upfront pmi AND monthly pmi. With a conventional (non fha mortgage) you can put between 5%-19% down (depending on lender) and you'll only have monthly pmi.
I'd encourage you to sit down with a few lenders, it can be a little intimidating at first expecially when your not ready to buy yet but it's really the best time. Explain when your goals are and have them walk you through what it would look like and what's needed to get there and what the finances would look like.
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Jeremy Brown
Rental Property Investor · Folsom, CA · Member since 2016 · 140 posts · 70 votes
10y
It sounds like you could be on the hairy edge of being able to buy. Be sure you're ready with reserves for repairs and vacancies.
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