When can I drop my Mortgage Insurance on my home in Franklin Tennessee?

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Mortgage and Lending with SWBC Mortgage 740662

When can I drop my Mortgage Insurance on my home in Franklin Tennessee?PMI Removal Franklin TN

When can I drop my Mortgage Insurance on my home in Franklin Tennessee?  This is a question I hear frequently primarily due to the loss of the 80/20 or 100% purchase loan.  In today's market if you do not have 20% to put down you are going to pay some form on Mortgage Insurance.  Either Primary Mortgage Insurance (PMI) on the Conventional Loan or Mortgage insurance Premium (MIP) on the FHA side.  The exceptions are with VA Loans and USDA/Rural loans. 

What is Mortgage Insurance?

Private Mortgage Insurance is a policy that covers the mortgage company in the event the home buyer defaults on the mortgage note. It is commonly referred to as "MI" and is usually obtained through the mortgage company.

Mortgage Insurance does not cover the real property but rather the Mortgage Note. It comes under the category of Contract Performance Insurance and is in the Property and Casualty line. The term "private mortgage insurance" differentiates it from government insurance. Loan products such as FHA, VA and USDA Rural Housing loans also carry insurance but it is from the government and is built into the cost of the loan, rather than being purchased separately.

So how do I get rid of it? 

Fannie Mae and Freddie pretty say you can request the lender drop the PMI once the balance of the loan reaches 80% of the appraised value of the property at the time of the loan.  There is no seasoning requirement.  An important thing to note is that the payment must be current with no 30 days past due in the previous 12 months and no 60 days past due in the preceding 24 months.  In accordance with the Homeowners Protection Act (HPA) of 1999 provides for the automatic termination of PMI at the 78% Loan to value of the original valuation at the time of the loan.  See the chart provided by Genworth Financial.

What about MIP?  The government Insurance?HUD FAQ

MIP is the HUD funded Mortgage Insurance provided for FHA Loans.  It is designed to encourage lenders to make credit available in areas and to borrowers who might not otherwise qualify for conventional loans on affordable terms.   FHA loans have become a larger percentage of the total market as they have lower down payment requirements and currently there are few adjustments to the rate for lower credit scores. 

There are two forms for this insurance.  The UP/Front MIP which is rolled on top of the loan amount and the monthly premium.  The borrower can request the monthly premium be removed when the loan to value reaches 78% of the value at the time of the loan.  However they must have a 5 year history of good payments.   Like PMI, MIP is automatically removed at 78% loan to value as long as there is 60 month payment history IAW the HPA of 1999. 

The difference regarding removal of the mortgage insurance is this.  Conventional has a 12 month payment history and FHA requires 60 month payment history. 

 

Comments (2)

Franklin & Brentwood, TN Homes Mike Nastri
Keller Williams Realty - Franklin, TN
It matters to us as much as it matters to you.

Thanks for posting this Lee, i attempted to explain this all to Julie after you left.  I will refer to this for home buyers or better still send them to you.   Love the new heading banner and background.

Feb 02, 2010 02:14 PM
Larry Brewer - Benchmark Realty llc
Benchmark Realty LLc - Nashville, TN

Lee- great information. by the way, your new heading looks great. I reblogged this.

Feb 03, 2010 02:10 AM