How to Remove the Mortgage Insurance Premium From an FHA Loan

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Removing the mortgage insurance premium from an FHA loan is something you'll have to do in a very particular way. Remove the mortgage insurance premium from an FHA loan with help from a managing broker with Windermere Real Estate in this free video clip.

Part of the Video Series: Real Estate Questions
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Video Transcript

Hello, Jim Jacobsen with Windermere Real Estate in Seattle, Washington. I'm a Managing Broker. And the question sums, comes up today regarding FHA and Private Mortgage Insurance. An FHA is handled differently than conventional. So, what I found out from my lenders is this, that I must be in a 20 percent equity position, meaning, I've paid 20 percent total of the principal balance on that loan in order to get a removal of the insurance premium and I must be in the property for five years. So, let me simplify that a little bit for you. If I buy a home for $100,000 and I've put 3 1/2 percent down, that would leave me a balance of $96,500. And over the course of the next five years, I'm going to pay some principal down, but not a great deal. So, I'm going to be making additional principal payments so that at the end of five years, I would have paid off totally, including my down payment, $20,000 in principal reduction; meaning that I only owe $80,000 on that loan. I can now go to FHA and they will remove the PMI payment.

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