Pay Mortgage Insurance up front or factor into loan?

Which option would you choose?

Assume home is worth $ 340k and you are refinancing for a 90% loan.
Would you pay $ 1439 (plus tax and home insurance) at interest rate of 3.875%. Closing costs would be about $ 21,000 which includes $ 4896 for Mortgage Insurance. Principle to pay off is $ 306,000k (90% of home only).
-OR-
Would you pay $ 1550(plus tax and home insurance) at interest rate of 4.5%. Closing costs would be about $ 16,000. Principle payment here is higher since you are factoring the MI into the loan. Principle to pay off is $ 311,661 with the MI.

Also, you expect to stay in the home for the next 5 years. After that.. who knows.. first kid on the way too 🙂

I was laid-off from work within the last year and it is becoming increasingly difficult to make my mortgage payment each month. I contacted BoA, who holds my loan and they said there was nothing they could do without paying hefty closing costs to refinance, which mI currently do not have. I thought I was a prime candidate for refi with my current situation. Could someone please direct me to the correct government agency that is responsible for the housing stimulus. Thanks in advance.

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