Can I Get PMI Dropped From My FHA Mortgage?

FHA mortgages charge mortgage insurance premiums, not private mortgage insurance.

FHA mortgages charge mortgage insurance premiums, not private mortgage insurance.

The good news about taking out an FHA mortgage is that you don't have to pay for private mortgage insurance, so you don't have to worry about getting PMI dropped. The bad news is that you do have to pay for mortgage insurance premiums, which you can get dropped after you've paid down your mortgage and built equity in your home.

Terms Over 15 Years

If your FHA mortgage has a term longer than 15 years, you must meet two criteria to drop mortgage insurance premiums from your mortgage. First, your loan-to-value ratio must be 78 percent of less. Second, you must have paid the premiums for at least five years. Once these two conditions are met, you're home free.

Terms 15 Years and Less

If you take out an FHA mortgage with a term of 15 years or less, you still have to get your loan-to-value ratio below 78 percent before you can cancel the mortgage insurance premiums. However, there is no time requirement. so if you get the loan-to-value ratio down to below 78 percent within a year or two, that's when you can drop the mortgage insurance premiums.

Loan-to-Value Ratio

The loan-to-value ratio measures the amount remaining on the FHA mortgage as a percentage of the home's value. The home's value equals the lesser of the sales price or the appraised value at the time you took out the FHA mortgage. No future appraisals, higher or lower, are considered in figuring when you can drop your mortgage insurance premiums.

No MIP Needed

If you take out a FHA mortgage with a term of 15 years or less, you can avoid mortgage insurance premiums altogether if you make a down payment greater than 10 percent. For example, if you're buying a home with a value of $200,000, if you put down more than $20,000 as your down payment, you'll never have to pay the annual mortgage insurance premiums.

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