For FHA mortgages, it's PMI by another
name
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 Dear
Dr. Don,
I'm buying a home with an FHA mortgage at
6.5 percent. Is there any way to avoid having the PMI amount
financed into my mortgage amount or can I avoid it altogether?
I'm not putting 20 percent down. My mortgage amount is $244,500.
With PMI of $3,667, it's up to $248,167. Please advise. Thanks.
-- Marisol
Mortgage
 Dear
Marisol,
FHA (Federal Housing Administration) insured
mortgages don't have private mortgage insurance (PMI). Instead,
FHA mortgages carry mutual mortgage insurance (MMI). The MMI
premium is paid through both an upfront mortgage insurance
premium (MIP) and a monthly mortgage insurance (MI) premium.
Any unused portion of the upfront MIP may be refunded within
the first 60 months of the loan.
The monthly mortgage insurance payment will
automatically be canceled when the outstanding principal balance
reaches 78 percent of the original purchase
price (provided that the monthly mortgage insurance payments
have been made for a minimum of five years for 30-year loans).
Home buyers making a down payment greater than 10 percent
of the purchase price, however, don't have to pay the monthly
mortgage insurance when financing with a 15-year mortgage,
but do still have to pay the upfront MIP.
Bottom line: You can't avoid mortgage
insurance on an FHA loan. The upfront MIP doesn't have to
be financed in your mortgage. Just bring the payment to closing.
Many FHA home buyers are struggling to raise the down payment
and won't be able to pay cash at closing for the MIP, but
it is an option.
-- Posted: Sept. 28, 2004
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When
applying for credit cards with better terms, should I drop the old
cards so that I don't have too much available credit, or should I
keep them because of the age of the accounts? 
