Ok so, you may Wonder what it is… and do you have to pay it?
If your Down Payment on a home is less than 20 percent, you will have to pay for mortgage insurance. In some cases you may still have to pay, or pay it in full. Ok so …
What is PMI?
Other wise known as Private Mortgage Insurance, serves as just that Insurance, it will reimburses the lender if you default on your home loan. You, the borrower, pay the premiums, Normally tacked onto your monthly Mortgage payment . Often it is referred to as private mortgage insurance, or PMI, on your monthly bill. The Federal Housing Administration, also known as FHA, is a government agency, also sells mortgage insurance
Now you may ask what are the fees? and what do the run?
Well, Private mortgage insurance, or PMI fees can, and do vary, this is all depending on the size of the down payment, your credit score, etc. But on Average, from our knowingness of the rates, again we are not loan officers or a conventional style bank, nor an attorney, so do your own home work, here is what we came up with it runs from approximately 0.3 percent to about 1 and a half percent of the original loan amount per year. and in Some years, PMI premiums are tax-deductible and some in other years they’re not, depending upon how the U.S. Government feels that year.
How mortgage insurance is calculated.
Again we are NOT a bank, FHA, HUD, Attorney, a lender or any of that, this is just from what we know from our experiences, pleases do your homework..
This is for example purpose only..
Let us say John Smith comes and buys a house for $200,000
he puts 10 percent down, that leaves $180,000 that the bank lends on the house, and let us say he has about a middle 700 credit score, between 730 and 750 for example.
let us say the insurance rate is .44%, and loan is $180,000, The rough Annual Premium would be approx.. $792, so the monthly would be about $66 give or take some, again this all varies on credit score, down payment, Insurer, etc. Those figures were calculated using this Source: Bankrate.com, Radian mortgage insurance calculator.
and again this is just for demonstration reasons.
There again Most PMI policies require the borrower to pay monthly, how ever Borrowers may also have the option of paying for mortgage insurance with a large upfront payment, like previously stated.
PMI can be canceled
For it to be canceled, your lender must automatically cancel PMI when your outstanding loan balance drops to 78 percent of the home’s original value. This may take several years.
However, you maybe able to speed up the cancellation of mortgage insurance by keeping track of your payments. Once the loan balance reaches 80 percent of the home’s original value, you may ask the lender to discontinue the mortgage insurance premiums. want more info on that follow the link.
here is another way to put it: You can request cancellation of mortgage insurance when the loan-to-value ratio drops to 80 percent. The lender is required to cancel private mortgage insurance when the loan-to-value ratio drops to 78 percent.
Loan to value is simply, how much is you loan for? and what is the property worth, for example Jerry owes the bank $78,000 on his house still, but it Appraises for $100,000, in that stat the Loan To Value is 78 percent.
We are talking about PMI, not FHA
As any one that knows that is in the industry, Recent FHA-insured loans require payment of mortgage insurance premiums for the life of the loan, no way around that, you could pay it up front, but you are still paying it. The mortgage insurance premiums can’t be canceled. Instead, you have to refinance the loan. You want more information about FHA loans, feel free to contact us at our Website We can definitely put you in touch with the right people to get your question answered.
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