Can I get more clarity on this please?

“FHA monthly mortgage insurance must be paid until you have paid down the loan to 80% of what was originally borrowed – it does not factor in property appreciation at all. So if you borrowed $100,000 originally, you would be required to pay monthly mortgage insurance until you reached a loan amount of $80,000.”

I am in the process of buying a short sale in northern virgina. It will be my main residence. I am getting an FHA loan and putting about 5% down. The loan amount will be 195k. I hoping to rid myself of PMI in the future through appreciation but it sounds like that is not the case? Based on 195k, does that mean that the loan must be paid down to 156k (195k x .8) before PMI can go? What if the value of homes in my neighborhood come back some and are selling for 250k? 300k? Two years ago everything in this neighborhood was going for 400k. I don’t expect it to come back full force, but I would think values could rise 20% over time. I can’t pay for an appriasal to prove value? I was hoping that an appraisal of around 235K (195 x 1.2) in the future would make the bleeding stop. If this is true, can you point me to the rule? I assume this is coming from FHA? Comps don’t prove reasonable value? Is this there way of helping out new homebuyers?

I’m guessing that paying off 40k could take the better part of a decade while appreciating 40k could take as little as a year- I think we’re near the bottom! :)

Do you know the process of making PMI go away after the 80% value has been reached? Just a few phone calls to verify current loan value vs. original loan value?

I have a mortgage broker I’m using. Who do I owe? Is my broker’s company making the loan? Or am I borrowing from the government? Or is the government just backing up this risky (only 5% down) loan for the mortgage company?

Can the loan be refinanced after some appreciation? Not sure how rates will be in the future of course. Probably not worth another round of closing costs.

Maybe I’ll start thinking about weighing $90/month in PMI against a possible credit card balance transfer assuming this transaction goes forward (still in a bank “holding pattern” of course). American Express was nice enough to finance 20k for me in the past at 0.99% for the life of the loan Let’s hope they bring those back at some point! :)

Wish I could scrap up more down money. Thanks in advance for any deeper insights you may have,

Marc