Lenders had previously developed many programs that did not include mortgage insurance on loans greater than 80% LTV. I think that is about to change. Lenders have been losing money on defaulted loans and they will take that risk out of their loans. Here is the latest law regarding mortgage insurance.
Mortgage Insurance Law
When putting less than 20 percent down on a home mortgage, lenders often require you to have Private Mortgage Insurance (PMI). PMI protects the lender if you default on the loan. The Homeowners Protection Act of 1998 establishes rules for automatic termination and borrower cancellation of PMI on home mortgages. These protections apply to certain home mortgages signed on or after July 29, 1999 for the purchase, initial construction, or refinance of a single-family home. These protections do not apply to government-insured FHA or VA loans or to loans with lender-paid PMI. For mortgages signed on or after July 29, 1999, your PMI must - with certain exceptions - be terminated automatically when you reach 22 percent equity in your home based on the original property value, if the payments are current. Your PMI also can be canceled, if you request and when you reach 20 percent equity in your home based on the original property value, if your mortgage paymentsare current. One exception is if your loan is "high-risk." Another is if you have not been current on your payments within the year prior to the time for termination or cancellation. A third is if you have other liens on your property. For these loans, your PMI may continue. Ask your lender or mortgage servicer (a company that collects your payments) for more information about these requirements. If you signed your mortgage before July 29, 1999, you can ask to have the PMI canceled once you exceed 20 percent equity in your home. But federal law does not require your lender or mortgage servicer to cancel the insurance. On a $300,000 loan with 10 percent down ($30,000), PMI might cost you $120a month. If you can cancel the PMI, you will save $1440 a year and many thousands of dollars over the loan. Check your annual escrow account statement or call your lender to find out exactly how much PMI is costing you each year.
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I'm pretty sure that there is no PMI if there is 20% down at time of purchase, but you have to push that 2% to get rid of it by paying it down to 78% not 80%. Not sure if that is the original purchase price or the then appraised value, but I'm pretty sure it's 78% and not 80% except at time of purchase.
The want a 2% cushion before they remove the PMI.