As I stated in my blog on Monday titled "What The Homeowner Protection Act Is, And How Does It Affect You?" I would be posting a more detailed blogs on how both Private Mortgage Insurance (PMI), and the FHA Monthly Insurance Premium (MIP) can be canceled, and when. This blog will be How And When Private Mortgage Insurance (PMI) Maybe Canceled. My next blog will address how and when FHA Monthly Insurance Premium (MIP) maybe be canceled after the FHA MIP changes in June 3, 2013.
PMI is required on Fannie Mae and Freddie Mac backed mortgages that have a Loan-To-Value (LTV) that is greater than 80%. In other words, if the Borrower has less than a 20% downpayment, PMI will be required on the mortgage.
The Borrower can however, request for the PMI to be canceled/eliminated once one of the following three things happen:
- The principle balance on the mortgage reaches 78% the PMI will automatically be canceled by the Lender.
- The principle balance on the mortgage has reached 80% of the purchase price of the property, or beginning loan amount if the present mortgage was a refinance, the Borrower can request for the Lender to cancel the PMI
- The Borrower believes they have 20% equity in the property (80% LTV) and requests for the Lender to do a new appraisal on the property (paid by the Borrower). If the new appraisal shows the LTV is now 80% or less of the purchase price, or beginning loan amount if the present mortgage was a refinance, the Lender may cancel the PMI. The 20% equity can be reached by:
- The principle balance on the mortgage has been paid down to 80%
- Home prices have gone up to the point there is now 20% equity in the property.
- The Borrower reaches 80% LTV through a combination of paying down the principle balance of the mortgage and the value of the property increasing.
These are the guidelines for How And When Private Mortgage Insurance (PMI) Maybe Canceled. However, Lenders may require the Borrower to pay PMI two or more years even if the Borrower meets the above requirements before two years. Borrowers should inquire whether the Lender has a minimum time requirement before spending money on a new appraisal.
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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, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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