A Texas homeowner with an FHA loan wants to remove the annual mortgage insurance premium (MIP). The loan was originated in 2024 with a 3.5% down payment on a 30-year term. Under current FHA rules, when can the MIP be removed?
Correct Answer
A) MIP cannot be removed for the life of the loan because the initial LTV exceeded 90%
Under current FHA rules, for loans with an initial LTV above 90% (such as 96.5% LTV with 3.5% down), annual MIP is required for the life of the loan. Since a 3.5% down payment results in 96.5% LTV, the MIP cannot be removed. This differs from conventional PMI, which can be removed at 80% LTV.
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A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
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Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
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