Cheryl Knowlton: Hi, everybody. Cheryl Knowlton, Dynamite Productions, coming at you with Clay Johnson.
Clay Johnson: Hi.
Cheryl Knowlton: Episode two of What is Mortgage Insurance? So Clay, let’s talk about the difference between FHA mortgage insurance and conventional.
Clay Johnson: Well, there are a couple of good things about FHA. It’s always going to be the same on an FHA loan, and you have two things. You have a funding fee that’s upfront that’s 1.75% of whatever your loan amount is that’s added on to the back of your loan. In addition to that, you have a consistent figure that’s always going to be the same. And here’s the thing. FHA, you have it on every single loan, and so it’s going to be there for the life of that loan. There’s no getting rid of it without refinancing to a conventional loan, even if you pay it way down, and so conventional is very different.
Clay Johnson: Conventional is going to be a different amount. There’s no upfront funding fee on a conventional one, but you have a monthly scenario that can vary depending on how much you’re putting down and also what your credit score is.
Cheryl Knowlton: Yes.
Clay Johnson: So credit score can really impact it. Like I said, FHA, it’s always the same kind of in that mid range, but if you have good credit, you can get mortgage insurance for a lot more affordable rate than you can with FHA with a good down payment and some great credit as well.
Cheryl Knowlton: Interesting.
Clay Johnson: Yes.
Cheryl Knowlton: Yes, indeed. On FHA is it still referred to as UFMIP? The upfront mortgage insurance premium?
Clay Johnson: Yes. Upfront mortgage insurance yep.
Cheryl Knowlton: Since we don’t speak English in this business, and it’s all about the acronym.
Clay Johnson: Yes.
Cheryl Knowlton: Yeah, upfront and monthly on FHA.
Clay Johnson: Yes. You have both on FHA. Yep. And like I said, there is no getting rid of it. But on conventional, once you’ve paid that down by more than 20%, or excuse me… yeah, more than 20% what your original purchase price was, it’s going to automatically fall off. Now, after two years, if values are going up and you feel like you have good equity there with more than 20% equity or 22 in some cases, then then you can say, “Hey, here’s my appraisal. I would like to drop this mortgage insurance.” Or they’ll order an appraisal for you can get rid of it, which is great.
Cheryl Knowlton: Yeah. That is great.
Clay Johnson: So you’re not stuck with it for the life of the loan.
Cheryl Knowlton: Fantastic.
Clay Johnson: Yeah.
Cheryl Knowlton: All right. Well, thank you for being with us for this episode. We’ll see you at the next one.