Refi Without PMI, Even if Your Home Value Has Declined

Have property values declined, not so much as to put you ridiculously upside-down, but enough that your current loan balance may no longer be less than 80% of the current value of your home? If you're in a position where you don't pay PMI now because you didn't need to pay it when you first took out your current loan, or because you didn't need it the last time you refinanced... perhaps you've felt that refinancing wouldn't benefit you, having heard that the cost of PMI has increased significantly over the past few years.

Many homeowners are unaware that both Fannie Mae and Freddie Mac have refinance programs available whereby if you have a conventional loan on which you were not required to pay PMI at its inception, you can refinance your loan at the current low rates and NOT pay PMI even if your current Loan-to-Value ratio is no longer less than 80%.

You do have to meet a few reasonable requirements to qualify.

Here is a preliminary test.

Y   N     Do you have a conventional loan?

Y   N     Did you have to pay PMI on your current loan when you got it?

Y   N     Do you currently owe more (on your first mortgage alone) than your home's current value?

Y   N     If you have a second mortgage, will your junior lienholder subordinate?

Y   N     Have you had any late payments on your existing mortgage in the past 12 months?

If you selected the answers I marked in bold, you likely qualify for a refi with no PMI (even if your current Loan to Value is > 80%!).

More details:

• If the existing loan (the loan being refinanced) does not have PMI, the new loan will not need PMI regardless of the LTV.
• The new loan can be used to pay off the existing 1st mortgage and cover closing costs, but the maximum cash back to the borrower is $250.
• Also, the maximum allowable LTV is 105%. (Meaning, if your property has declined so much that you are more than 5% upside down (considering the current value and the payoff of your first mortgage plus the closing costs if you wish to roll those in), you will not qualify.)
• New subordinate financing is not permitted. (You can leave the existing junior mortgage(s) in place if they agree to re-subordinate)
• There is no maximum CLTV (Combined Loan To Value (i.e. Total of all loans combined) or HTLTV (Total of loans and home equity lines combined). (In other words, so long as the first mortgage you are refinancing is less than 105% of the current market value, you will still qualify to refinance that first mortgage even if junior liens would take you over 105%!)
• Automated underwriting determines if an appraisal is needed. (The purpose of the appraisal is to determine if the new loan will be over 105% of the current value, NOT to determine whether or not you will have to pay PMI.)
• For credit scores, property types, occupancy types, high LTVs and subordinate financing, pricing adjustments apply, just as they do in regular purchase and refinance transactions.
• New loan can be a 30, 20 or 15 Year Fixed Rate or a 5/1, 7/1, or 10/1 ARM for true conforming loan amounts (loan amounts of $417,000 or less).  New loan can be a 30 or 15 Year Fixed Rate or a 5/1, 7/1, or 10/1 ARM for super conforming loan amounts.
• Available for all occupancy types (owner occupied, 2nd homes and investment properties)
• Available for all property types (1 - 4 unit properties).