YOU ASK:

When can I drop the mortgage insurance premium on my FHA loan?

WE ANSWER:

You can cancel your mortgage insurance and stop mortgage insurance premiums on your FHA loan if your balance on the loan has reached 78%.

You can also try to cancel the mortgage insurance early. You can do this by paying additional funds towards your loan so that it reaches the minimum equity required. For early cancelation, though, there is an additional consideration that you must have 5 years of payment history.

To guide you on how to cancel your mortgage insurance premiums on your FHA loan, remember to do the following:

  1. Study for the amortization schedule, as well as your closing statement. This will provide you with information as to when the premiums can be canceled.
  2. You can also calculate whether you are already at the 78% of the value by multiplying your appraised value (or purchase price, whichever is smaller) with 78%. This is what your balance will be in order to have your premiums removed. Then look this amount up on your amortization schedule to see which period this will fall into.
  3. Check to also see where you are on the amortization schedule and then deduct the figure you got from step 2 to your present balance. You should think up a plan for you to pay off this amount.
  4. Once you have the required equity, you can approach your lender to ask that you drop your mortgage insurance premiums on your FHA loan. A lender may be willing to drop it earlier as long as you have paid your mortgage payments regularly and without fail for the last 5 years.
  5. You may need to provide proof that you have satisfactorily met the conditions. Photocopy the page in your amortization schedule that matches the present balance. Also furnish copies of the closing statement and original appraisal (documents that you have received upon closing the sale of your house). Also draft a letter of request stating your desire to drop the mortgage insurance.
  6. Send the documents and letter by registered mail and keel the return receipt as proof that they have received your request
  7. Call to follow if you have not heard from them in the next 30 days.
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