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Problems with getting a mortgage refi to remove MIP (Mortgage Insurance)

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I currently have an FHA mortgage with an additional Mortgage Insurance Premium (MIP) on it each month.  I took out the mortgage in late 2016, and at the time was only a few years out of a Chapter 7 bankruptcy.  From what I recall, in order for me to be included on the mortgage and the deed (and be able to get it), I had to take out the mortgage with my parents and put down 20% and have MIP as part of the mortgage.  

 

In hindsight, I probably should have waited a few more years.  I'm trying to figure out a way to refi right now in order to at least get rid of the MIP.  I'm almost at 7 years from when the Ch. 7 bankruptcy was discharged, but my big problems at this point are that I'm self-employed and don't show a lot of income (I'm able to deduct a lot) and my parents are both retired now and don't show much income either.  

 

My credit score is very good (in the 730's), I've never missed a payment on the mortgage, and I've been in business for myself for 11 years - but I think the big problem is the debt-to-income ratio.  We've talked to the mortgage broker that helped us a few years ago but he says at this point there's nothing we can do (even with my parents on the refi again).  

 

It's not the end of the world if I'm stuck with the MIP, but I'd like to save some money considering what's going on with the economy and saving money at this point is probably a good thing.  

 

Anyone have any ideas or suggestions?  Are there any non-conventional routes I can take?  

 

Thanks!

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I thought with 20% down there wasn't any PMI? or is MIP different than PMI and if so, whose benefit is the MIP for?

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I'm not entirely sure what the difference between MIP and PMI is, except that they seem to often be confused (including by me).  But I definitely have MIP, and was definitely required to take it (at least so I was told) to get a mortgage a few years ago (when I was only 3 - 4 years out of my Ch. 7 bankruptcy).  And it seems I was also required to put 20% down in addition, plus have my parents on the mortgage.  I'm thinking not all of those would have been required but possibly because I'm self-employed and therefore don't show a lot of income, plus the Ch. 7 bankruptcy being relatively recent meant I had to do all of that.  However now I'd like to find a way to save some money if possible by getting rid of the MIP.

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9 hours ago, ColonelSandurz said:

We've talked to the mortgage broker that helped us a few years ago but he says at this point there's nothing we can do

What are the main obstacles to approval? 

9 hours ago, ColonelSandurz said:

I think the big problem is the debt-to-income ratio

Why do you think this?

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1 hour ago, ColonelSandurz said:

The main obstacle to approval is the debt-to-income ratio - and I know this because of the research I've done and what the mortgage broker told us.

You aren't going to find palatable terms on a mortgage if the ratios say you can't afford to pay it back.

 

How far off are you?  Is the frontend okay, or are both the frontend and backend out of whack?  

 

https://www.investopedia.com/terms/f/front-endratio.asp 

https://www.investopedia.com/terms/b/back-endratio.asp 

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They are both out of whack I think, although honestly I don't recall at this point since I've seen a dizzying array of numbers and info related to this whole process over the last week.  However I think I'm pretty far off - the problem is that I'm self employed and take a lot of deductions, so while I have no issues paying back the mortgage (I've been doing so for the last 3 1/2 years), my AGI is low as a result of the deductions I take.  And 3 1/2 years ago when I took out the mortgage my parents were working, but now they are retired so while they have plenty in assets, their income is low or non-existent (offset by deductions, losses, etc. that they are able to take).  

 

I've heard a little about nonQM programs that are suitable for self-employed individuals, but apparently with the Coronavirus pandemic a lot of companies are suspending offering these.  So I might just be out of luck at this point.  I'm looking into a streamline FHA refi to see if that might help lower my monthly payments a bit without very much in the way of refi costs.  I'm also going to see if the federal government is going to do anything with respect to mortgages - who knows.

 

Any other help or info is always appreciated.

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I'm not entirely sure what the difference between MIP and PMI is, except that they seem to often be confused (including by me).  But I definitely have MIP, and was definitely required to take it (at least so I was told) to get a mortgage a few years ago (when I was only 3 - 4 years out of my Ch. 7 bankruptcy).  And it seems I was also required to put 20% down in addition, plus have my parents on the mortgage.  I'm thinking not all of those would have been required but possibly because I'm self-employed and therefore don't show a lot of income, plus the Ch. 7 bankruptcy being relatively recent meant I had to do all of that.  However now I'd like to find a way to save some money if possible by getting rid of the MIP.


You may be SOL if you look at the investopedia link in greater detail. The differences are mapped out. The rules appear to have hardened a lot after June 2013.

See here:


https://www.investopedia.com/ask/answers/071614/whats-difference-between-private-mortgage-insurance-pmi-and-mortgage-insurance-premium-mip.asp


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Posted (edited)
2 hours ago, ColonelSandurz said:

They are both out of whack I think, although honestly I don't recall at this point since I've seen a dizzying array of numbers and info related to this whole process over the last week.

Look at the articles I posted.  The math and the DTI guidelines are pretty straightforward.  

2 hours ago, ColonelSandurz said:

while they have plenty in assets, their income is low or non-existent

Start with this article for ideas and further research:  https://www.courant.com/consumer/hc-hre-harney-column-20181104-story.html 

Edited by cv91915

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If you have more than 20% equity in your home with an FHA and they won't let you get rid of the MIP, the only way to get rid of it is refinance with conventional loan.

 

Since you are self-employed, try not to take too much deduction as they want a good amount of taxable income.   You need to take the hit until you refinance into the conventional loan then you can go back to normal deductions again.  DTI ratio needs to be under 45%.

 

PMI is for conventional loan and MIP is for FHA.

 

https://www.lendingtree.com/home/refinance/refinance-fha-loan-to-conventional/

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If you're self-employed and taking deductions for business expenses lowers your income too much you are just not making good money. You can only deduct legitimate business expenses, business expenses are not income, hence its just low income. So either you are not as good at business as you think you are and should re-think being self-employed or you should stop cheating on your taxes.  

 

Might be harsh but as someone whos self employed it drives me crazy hearing this I've deducted my self into low income bs all the time.

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If you're self-employed and taking deductions for business expenses lowers your income too much you are just not making good money. You can only deduct legitimate business expenses, business expenses are not income, hence its just low income. So either you are not as good at business as you think you are and should re-think being self-employed or you should stop cheating on your taxes.  
 
Might be harsh but as someone whos self employed it drives me crazy hearing this I've deducted my self into low income bs all the time.

Seems pretty harsh to assume he is cheating on his taxes. Why do you come to that conclusion?


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22 hours ago, damba said:


Seems pretty harsh to assume he is cheating on his taxes. Why do you come to that conclusion?


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That's not cheating. @oldblue is talking about small biz owners who go through acrobatics to use deductions to reduce tax exposure. Deductions are not cheating, but for self-employed it can lead to "low" reported income. I'm sure if oldblue thought the OP was cheat'n he'd say so.

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That's not cheating. [mention=169246]oldblue[/mention] is talking about small biz owners who go through acrobatics to use deductions to reduce tax exposure. Deductions are not cheating, but for self-employed it can lead to "low" reported income. I'm sure if oldblue thought the OP was cheat'n he'd say so.

I understand what you are saying, but his post reads like one big finger wagging exercise. Sorry.

There are reasons why the OP might not benefit from having higher income. The cluster* of poor healthcare offerings in this country being a huge one.


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