With the premise that FHA is looking to better manage risk and strengthen their Mortgage Insurance Fund, the monthly MI is increasing to 1.35% for loans with loan to value greater than 95%. Effective June 3, 2013, the mortgage insurance premium will be extended for the life of the loan for those with loan to values greater than 90%. Previously mortgage insurance was cancelled at 78% loan to value and minimum of 5 years.
For those with borrowers with good credit and have a minimum of 5% down, conventional financing will be a great alternative. Mortgage Insurance companies reward borrowers with good credit by lowering the monthly MI which results in significant savings to the borrower. In addition, MI can be dropped after a minimum of 2 years and 78% LTV.