FAQ #6 .........At What Point Can I Get Rid Of The PMI Or MI?

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

My fifth blog for the ActiveRain contest that Anna 'Banana' Kruchten established in which we are to respond to the 10 most frequently asked questions that we are asked, was about a topic that actually is the source of at least a couple of Frequently Asked Questions.  So in the fifth blog I answered the question "PMI/MI Why Do I Have To Pay It?" So in this sixth FAQ blog I will answer the question that normally follows:

"FAQ #6 ......... At What Point Can I Get Rid Of The PMI Or MI?"

I can't blame Borrowers for wanting to know when they can get rid of PMI or MI after seeing what it is costing them each month, it is easy to see why they would want to eliminate PMI/MI as quickly as possible.  On a Conventional Mortgage if the Borrower makes the minimal downpayment of 5%, they can expect to see a PMI payment of about $78 dollars per month for each $100,000 they borrow.  On a FHA Mortgage if the Borrower puts down the minimal downpayment of 3.5% their MI payment will be $102.58 each month per $100,000.

Private Mortgage Insurance (PMI):  On Conventional Mortgages can be eliminated in a couple of ways:

  • By paying down the principle balance on the mortgage to 80% of the beginning Loan Amount the PMI payment will automatically be eliminated.
  • If the property value goes up due to increased Housing Values, the Borrower can request a new appraisal of the property, and if the remaining mortgage balance is 80% or less of the new appraised value (some times PMI Companies might want 78%) they can request that that the PMI be eliminated.

Note:  PMI Companies may require the Borrower to pay PMI for two years before eliminating the PMI.

Monthly Insurance (MI):  On a FHA 30 Year Fixed Mortgages can also be eliminated, but in only one way:

MI can only be eliminated after the Borrower has had the mortgage for at least FIVE YEARS AND (not or), paid down the principle balance on the mortgage to 78% of the original loan amount.

It does not matter how much property values go up during the five year period or after, the MI payment will remain until the principle balance has been paid down to 78%.  Also the MI payment will remain even if the principle balance has been paid down to 78%, until the full five years is completed.  BOTH the five years and 78% principle balance reduction have to be met, no exception on 30 year FHA Mortgages. The only way to avoid paying MI on a FHA Mortgage, is to do a 15 year or less mortgage, and make a 22% downpayment (78% Loan To Value), otherwise the above will apply.

 

Previous FAQ's Blogs.

"What Do I Need To Do To Get Pre-Qualified For A Mortgage?"

"What Do You Mean I Need Money For Closing Costs?"

"Why Do I have To Pay For A Full Year Of Homeowners Insurance Up Font When I Am Paying For It Every Month In My Mortgage Payment?"

"How Can I improve My Credit Scores?"

"PMI/MI Why Do I Have To Pay It?"

 

**********************************************************************************

  Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Posted by

******************************************************************************

 

 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

close

Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Sean Williams 05/23/2012 01:57 AM
  2. Gene Riemenschneider 05/24/2012 03:00 AM
  3. Gabe Sanders 05/27/2012 09:50 PM
  4. Winston Heverly 10/29/2012 12:45 PM
Topic:
Mortgage / Finance
Location:
Connecticut
Groups:
Realtors®
Mortgages
1st Time Buyers
Real Estate Rookie
ActiveRain Contests
Tags:
private mortgage insurance pmi and fha monthly insurance mi

Spam prevention
Show All Comments
Rainer
5,836
Bill Merritt
BBVA Compass - Plano, TX

George,

As a lender, I agree with what you have said, however, there is another alternative on not paying PMI on Conventional loans.  It is Lender Paid Mortgage Insurance.  As long as the borrower has a mid-score of 700+, should they be making a 5% down payment, they could increase the rate by approximately .375%, maybe .500% and not have PMI.  The monthly payment would be much less than the monthly PMI payment.  For a down payment of 10%, the rate might be as little as .250% higher.  Or, they may want to pay the required discount points to get the lower rate.  They can still get rid of PMI if the credit score is less than 700+, but the rate would be higher. 

This is a seldom used tool that is very friendly to the borrower.

A good job of you keeping everybody informed and educated.

 

 

May 22, 2012 02:50 PM #17
Rainmaker
106,251
Karen Deis
ApartmentToolKit.com - Minneapolis, MN
When In-house training is not enough!

I would like to add that on FHA, the 5-year waiting period is wavied if the borrower took out a 15-year loan and if they make regular monthly payments, that they would reach 78% in about 4 years.

Also, with minimum down payment, and regular monthly payments on both FHA and Conventional, it would take between 10 to 11 years to reach 78% loan to value. 

Karen Deis, Publisher, www.MortgageCurrentcy.com

...because getting a loan approved these days IS rocket science!

May 22, 2012 11:29 PM #18
Rainer
191,344
Bill Fields
Bill Fields Learning Systems - Treasure Island, FL

Very helpful updated info, thanks.

May 23, 2012 12:03 AM #19
Rainer
28,018
Sina Mollaan
W.C. & A.N. Miller, A Long & Foster Company - Washington, DC
ABR, GRI

Fantastic post, great information.  I'm moving on to your other blogs now.

May 23, 2012 12:16 AM #20
Rainer
32,708
Stephen Grannis Serving Albemarle,Greene,Madison,Orange
Charlottesville Solutions - Ruckersville, VA

Very good post! I will read the past post as well. I have a question. It said that both the 5yr and the 78% had to be fullfilled on the FHA. Does that mean in a declining market, people will have to pay the MI past the 5yrs if they don't have 22% equity?

I think another interesting point would be that the lenders will tend to appraise a house low when someone is already in it and looking to get rid of MI, but if someone were looking to buy the same house it would probably appraise for a lot more.

I agree with the post of getting rid of it! It is just a racket for the banks.

May 23, 2012 12:16 AM #21
Rainer
38,260
Kunni Biener
First Class Title, Inc. - Rockville, MD

thanks so much for a clear, concise explanation.  

May 23, 2012 12:22 AM #22
Ambassador
2,741,700
Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

George great FAQ for the contest. Very informative and exactly what FAQ contest is all about!  Answering frequenty asked questions!

May 23, 2012 12:37 AM #23
Rainmaker
193,502
Ben Yost - 303-587-4297
First Time Home Buyer, Mortgage Rates, Pre-Approval - Denver, CO
FHA, VA, Conventional - Mortgage Loans in De

Good Info for people! There is a lot of confusion out there about MI.

Good Post!

 

T

May 23, 2012 12:38 AM #24
Rainmaker
333,294
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
Santa Cruz Mountains Property Specialist

Thanks for clarifying not only PMI but also MI, plus how to get rid of the extra payments, George.

May 23, 2012 12:52 AM #25
Rainmaker
656,716
Pat & Wayne Harriman
Harriman Real Estate, LLC (203) 672-4499 - Wallingford, CT
Broker/Owners, Wallingford CT Real Estate

Great info George, and congrats on the feature! I've been kind of absent from AR for a while cuz we're really busy, but I plan to go back and read the first five posts, too!

May 23, 2012 01:23 AM #26
Rainmaker
120,440
Sean Williams
AcklesWilliams of Semonin Realtors - Louisville, KY
Your Louisville Realtor

I hate the 5 year rule with FHA, it needs to be changed so that once a buyer meets a certain ratio that number drops off. We shouldn't be holding back a borrower from putting more equity into their property because they are stuck with an additional PMI payment for a mininum of 5 years. Thanks for the post and I'll be reblogging!

May 23, 2012 01:54 AM #27
Rainmaker
89,674
Edith Schreiber
Luxury Homes, Move Up Buyers, 1st Time Homebuyers, New Construction - Frisco, TX
Dallas Area Real Estate

Hmmmm.....I somehow also missed the first five of your posts - I must go back and check them out!

Good stuff - thanks!

May 23, 2012 03:08 AM #28
Rainer
61,739
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

Good information that buyers as well as agents need to know.  

Also this gives me another reason to stay in contact with my past Buyers to remind them to contact the lender to have their MI/PMI removed if their loan meets the criteria you mentioned above.

Thanks for wonderful post.

May 23, 2012 05:17 AM #29
Rainmaker
97,445
Kathie Burby
Coldwell Banker Mother Lode Real Estate - Sonora, CA
REALTOR, SFR, Tuolumne County Real Estate Guide

Great information! Concise & easy for buyers to understand. I will be going back to check out your other posts.

May 23, 2012 06:46 AM #30
Rainer
295,171
Paddy Deighan JD PhD
TimeshareLawyers.pro - Vail, CO
Paddy Deighan J.D. Ph.D

PMI is such an important issue and few people discuss it....homeowners can save a fortune over the life of teh loan by paying attention to this important issue

May 23, 2012 07:09 AM #31
Rainmaker
1,430,900
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

This is a great post on a subject that we do not see a lot on.  Thanks for the information.

May 23, 2012 09:25 AM #32
Rainmaker
808,362
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi George, great post and excellent and clear explanation.  I did know how much per month it was.

May 23, 2012 07:55 PM #33
Rainer
54,560
Jairo Arreola
Lotus Group Realty - San Jose, CA
VA Home Loan Specialist - SF Bay Area - South Bay

Great Info! Thanks for breaking it down for us =)

Jun 18, 2012 10:07 AM #34
Rainmaker
1,003,899
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

It's good to hear about the FHA MIP requirement only being five years.  It used to be that the FHA MIP was on the loan for the entire life of the loan.  Obviously, this is much better.

Oct 29, 2012 01:17 PM #35
Rainmaker
315,878
Frank Laisch
1492 P&C AGENCY, LLC - Orlando, FL
"The Insurance Guy"

George, great way to break it down for us, this is easier to explain to a customer thanks for sharing

Oct 30, 2012 10:30 PM #36
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Ambassador
3,575,888

George Souto

Your Connecticut Mortgage Expert
Call Me With All Mortgage Questions
*
*
*
*
Spam prevention