by Joey Campbell
Dropping MIP will decrease monthly payments.
FHA is known for its low down payment requirement and credit guidelines that are looser than conventional lending. This risk is offset by mortgage insurance and makes this program available for borrowers who find saving money for a down payment difficult. In the event a borrower defaults and the home is foreclosed, it offers lenders a way to recoup losses. MIP has made it possible for millions of people to be able to buy a home.
When FHA makes changes to its guidelines, they are not retroactive back to all loans. They only affect future loans. The decision to allow MIP to be dropped went into effect on Jan. 1, 2001, so for MIP to be dropped
off, the loan must have been taken out after that date. It can be dropped when the loan is paid down to 78 percent of the sale price.
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