Couple learns they still owe mortgage insurance after thinking it was paid off

HICKORY, N.C. — The Carsons said they found a house in Hickory to buy “through the grace of God through a friend of ours.”

They bought it a few years ago with the help of a Federal Housing Administration loan. When you get an FHA loan, you must pay what’s called a Mortgage Insurance Premium at closing and then monthly.

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It protects the lender, not the borrower.

The amount varies depending on your down payment and other factors.

The Carsons told Action 9 investigator Jason Stoogenke that for them, it’s about $105 per month.

“We were under the impression that it would be coming off after two years,” Karen Carson told Stoogenke.

They found out the hard way when they hit the two-year mark that they had nine years to go.

Why? The finance company, Bankrate, explains it well, Stoogenke said.

There are four scenarios:

Your FHA loan started between July 1991 and December 2000: You must keep paying the insurance for the life of the loan.
Your loan started between January 2001 and June 3, 2013: You must keep paying the MIP until what’s called your loan-to-value ratio hits 78%. Ask your lender what that means in dollars and cents for you specifically.
Your loan was after June 3, 2013, and you made a down payment of less than 10%: You’ll pay MIP for the life of the loan.
Your loan was after June 3, 2013, and you made a down payment of more than 10%: You must pay the insurance for 11 years, and when your loan-to-value ratio hits 90%.

The Carsons fell into the last category. They must pay the MIP for 11 years and until their loan-to-value ratio hits 90%.

The couple said they now realize that all of it was in the fine print, but they didn’t notice, and no one pointed it out to them.

“If I had been more aware of that, I would have, naturally, not wanted to have to pay $105 for 11 years,” Steve Carson said.

“You should know what you’re signing,” Karen Carson added. “We just don’t want anyone else to find out too late like we did.”

Once you do your part as the borrower, your lender should stop charging you the insurance automatically. If you don’t want to wait, you can always refinance to a conventional loan. Just ensure it’s worth it. If you’re having problems making payments, your lender probably offers options.

Stoogenke spoke with the Carsons’ lender by phone. They reiterated that they don’t make the rules and that those are federal rules every lender must follow.

MIP is like something you may be more familiar with, tied to conventional -- not FHA -- loans: Private Mortgage Insurance (PMI).

You usually owe PMI when you put down less than 20% on your home, and you can stop paying it when you hit 20% equity in your home.

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