​Kentucky FHA vs ​Kentucky Conventional Mortgage Insurance: A Comprehensive Comparison

Kentucky Mortgage Insurance requirements for Kentucky homebuyers for FHA and Fannie Mae Conventional loans.

When it comes to ​Kentucky home loans, understanding the differences between ​Kentucky FHA and conventional mortgage insurance is crucial for potential homebuyers. This article will break down the key distinctions in terms of credit score requirements, down payments, upfront premiums, monthly premiums, duration, and cancellation policies.

​Kentucky Mortgage Credit Score Requirements

​Kentucky FHA Mortgage Insurance

• Minimum credit score: 580 for a 3.5% down payment
• Scores between 500-579 may qualify with a 10% down payment

​Kentucky Conventional Mortgage Insurance

• Typically requires a minimum credit score of 620
• Higher scores often result in better rates and terms

​Kentucky Mortgage Down Payment​ Requirements

FHA Mortgage Insurance

• Minimum down payment of 3.5% with a credit score of 580 or higher
• 10% down payment required for credit scores between 500-579

Conventional Mortgage Insurance

• Typically requires a minimum of 3% down payment
• Lower down payments often result in higher insurance premiums

Upfront Premiums​ for Kentucky Mortgage Loans

FHA Mortgage Insurance

• Upfront Mortgage Insurance Premium (UFMIP) of 1.75% of the loan amount
• Can be financed into the loan

Conventional Mortgage Insurance

• No upfront premium required

Monthly Premiums​ for Kentucky Mortgage Loans

FHA Mortgage Insurance

• Annual MIP (divided into monthly payments) ranges from 0.45% to 1.05% of the loan amount, depending on the loan term and loan-to-value ratio

Conventional Mortgage Insurance

• Monthly premiums vary based on credit score, down payment, and loan-to-value ratio
• Generally range from 0.17% to 1.86% of the loan amount annually

Duration​ for Kentucky Mortgage Insurance

FHA Mortgage Insurance

• For loans with an LTV greater than 90% at origination, MIP lasts for the life of the loan
• For loans with an LTV of 90% or less, MIP lasts for 11 years

Conventional Mortgage Insurance

• Typically required until the loan-to-value ratio reaches 78% through normal amortization

Cancellation Policies

FHA Mortgage Insurance

• Cannot be canceled for loans originated after June 3, 2013, if the initial down payment was less than 10%
• For down payments of 10% or more, MIP can be canceled after 11 years

Conventional Mortgage Insurance

• Can be canceled when the loan-to-value ratio reaches 80%, either through home value appreciation or additional payments
• Automatically terminates when the loan balance reaches 78% of the original value

Conclusion

While FHA mortgage insurance offers more lenient credit requirements and lower down payment options, it often comes with higher costs and longer durations. Conventional mortgage insurance, though potentially more challenging to qualify for, offers more flexibility in terms of cancellation and can be less expensive in the long run for borrowers with good credit. Prospective homebuyers should carefully consider their financial situation and long-term goals when choosing between FHA and conventional loans.

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).

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Kentucky FHA Annual MIP and VA Funding Fee Reduction - Update!

 

HUD and VA have both announced reductions to the costs associated with their loans in Kentucky for FHA and VA loans and lower mortgage insurance premiums.       Kentucky FHA Annual Mortgage Insurance Premium   HUD announced in Mortgagee Letter 2023-05 a .30% reduction to the annual (paid monthly) MIP rates as well as an increase to the base loan amount threshold for the lower MIP rates.  With this threshold increase, loan amounts greater than $625,500 but less than or equal to $726,200 can see up to .55% reduction in annual (paid monthly) MIP.   All loans in process and new applications will be able to use the lower rates, however, we are currently working on updating our system to accommodate and will advise as soon as that has been completed. This change helps to increase FHA products affordability and allows FHA product to be more competitive.   Please note, there is no change to the upfront Mortgage Insurance Premium (UFMIP), this change only impacts annual (paid monthly) MIP.  See below for a grid of the new rates versus the old rates. New Annual (Paid Monthly) MIP Rates: Loan Terms > 15 Years Base Loan Amount ≤ 95% LTV > 95% LTV <=$726,200 .50% .55% >$726,200 .70% .75% Loan Terms ≤ 15 Years Base Loan Amount ≤ 78% LTV >78% and ≤ 90% LTV > 90% LTV <=$726,200 .15% .15% .40% >$726,200 .15% .40% .65%            Prior Annual (Paid Monthly) MIP Rates:  Loan Terms > 15 Years Base Loan Amount ≤ 95% LTV > 95% LTV <=$625,500 .80% .85% >$625,500 1.00% 1.05% Loan Terms ≤ 15 Years Base Loan Amount ≤ 78% LTV >78% and ≤ 90% LTV > 90% LTV <=$625,500 .45% .45% .70% >$625,500 .45% .70% .95%           Kentucky VA Funding Fee   PRMG is pleased advise and align with the recent announcement by VA in Circular 26-23-06 for a reduction to VA funding fee rates for loans closed on or after April 7, 2023.   See below for a grid of the new funding fee versus the old funding fee. Funding Fee for loans closed on or after 04/07/23: Loan Purpose Down Payment % for 1st Time Use % for Subsequent Use Purchase 0 – 4.99% 2.15% 3.30% Purchase 5 – 9.99% 1.50% 1.50% Purchase 10% or More 1.25% 1.25% Refinance (Cash Out) N/A 2.15% 3.30%  Funding Fee for loans closed prior to 04/07/23: Loan Purpose Down Payment % for 1st Time Use % for Subsequent Use Purchase 0 – 4.99% 2.30% 3.60% Purchase 5 – 9.99% 1.65% 1.65% Purchase 10% or More 1.40% 1.40% Refinance ​​​(Cash Out) N/A 2.30% 3.60%   HUD announced in Mortgagee Letter 2023-05 a .30% reduction to the annual (paid monthly) MIP rates as well as an increase to the base loan amount threshold for the lower MIP rates.  With this threshold increase, loan amounts greater than $625,500 but less than or equal to $726,200 can see up to .55% reduction in annual (paid monthly) MIP.   All loans in process and new applications will be able to use the lower rates, however, we are currently working on updating our system to accommodate and will advise as soon as that has been completed. This change helps to increase FHA products affordability and allows FHA product to be more competitive.   Please note, there is no change to the upfront Mortgage Insurance Premium (UFMIP), this change only impacts annual (paid monthly) MIP.  See below for a grid of the new rates versus the old rates. New Annual (Paid Monthly) MIP Rates: Loan Terms > 15 Years Base Loan Amount ≤ 95% LTV > 95% LTV <=$726,200 .50% .55% >$726,200 .70% .75% Loan Terms ≤ 15 Years Base Loan Amount ≤ 78% LTV >78% and ≤ 90% LTV > 90% LTV <=$726,200 .15% .15% .40% >$726,200 .15% .40% .65%            Prior Annual (Paid Monthly) MIP Rates:  Loan Terms > 15 Years Base Loan Amount ≤ 95% LTV > 95% LTV <=$625,500 .80% .85% >$625,500 1.00% 1.05% Loan Terms ≤ 15 Years Base Loan Amount ≤ 78% LTV >78% and ≤ 90% LTV > 90% LTV <=$625,500 .45% .45% .70% >$625,500 .45% .70% .95%           Kentucky VA Funding Fee   VA in Circular 26-23-06 for a reduction to VA funding fee rates for loans closed on or after April 7, 2023.   See below for a grid of the new funding fee versus the old funding fee. Funding Fee for loans closed on or after 04/07/23: Loan Purpose Down Payment % for 1st Time Use % for Subsequent Use Purchase 0 – 4.99% 2.15% 3.30% Purchase 5 – 9.99% 1.50% 1.50% Purchase 10% or More 1.25% 1.25% Refinance (Cash Out) N/A 2.15% 3.30%  Funding Fee for loans closed prior to 04/07/23: Loan Purpose Down Payment % for 1st Time Use % for Subsequent Use Purchase 0 – 4.99% 2.30% 3.60% Purchase 5 – 9.99% 1.65% 1.65% Purchase 10% or More 1.40% 1.40% Refinance ​​​(Cash Out) N/A 2.30% 3.60%