Home Buying in Charlotte>Question Details

Anjana Harsha, Home Buyer in Waxhaw, NC

Is mortgage insurance Is compulsory . How it can be reduced.?

Asked by Anjana Harsha, Waxhaw, NC Wed Nov 14, 2012

Help the community by answering this question:

Answers

7
It is not mandatory. But as Larry said below if you do not have enough down for the loan you have they make you pay that Private Mortgage Insurance or PMI. If you already own the house, your only way to remove it is to refinance with a program that doesn't have PMI, or to pay enough money into your house so that you meet the qualifications to remove it.

If you are just now shopping for a home there are several programs out there that do not have PMI payments. Your best bet is to talk to a mortgage broker and a real estate agent that know the areas you want to live in. They can tell you what programs are out there. (So don't just hit a link for a loan on line.... You need local knowledge).
2 votes Thank Flag Link Thu Nov 15, 2012
Good morning, Anjana:
If you pay 20% down and borrow 80% conventional loan, or FHA 22% down on a 15 year fixed term you can avoid mortgage insurance (MI). Some people got a 80/15/5 loan, where there was an 80% first 15% second and 5% down to not have MI, but banks are not making many of these loans anymore (check with your lender for specifics). You can also negotiate with the seller to pay some of your costs and pre pay your mortgage insurance with it. USDA has lower MI rates.

But MI should not really be much of a concern because it is tax deductible just like interest (check with your CPA). It is usually best to focus on a monthly payment that is comfortable and fits your finances and family budget, get a reasonable interest rate and find a home you like. If you have a full time agent with a Masters degree in Planning with Finance and over two decades of experience, working for you, you will likely do better in negotiations. I'd be pleased to provide that service. If you appreciate this answer, please give it a thumbs up, or if this was the most helpful answer, please say thanks with a best answer click.
0 votes Thank Flag Link Thu Nov 29, 2012
Mortgage insurance is compulsory if you do nto put down 20%. the actual dollar amount varies depending on the amount you put down and the type of loan you take. USDA has one formula they use for calculating mortgage insurance. As does the VA and FHA. conventional loans also have one based on a set criteria.

The only way to avoid it is to put 20% down. Though I have seen some people put as little as 5% down and pre pay their mortgage insurance or negotiate enough in closing costs to help defray the cost of it and put the difference down.

The nice thing about it is that it is not permanent. mewaning that you do not have to pay it for the life fo the loan. generally it is around 5 years or until you reach 78% of the loan value of the house. I have it on my house and will be hitting the five year mark as well as the ratio soon...i will be looking forward to the reduction in my payment when that tiem comes as well.

Dave diCecco
Realtor/Broker
Coldwell Banker United
http://www.davedicecco.com
0 votes Thank Flag Link Thu Nov 15, 2012
If the loan you qualify for requires mortgage insurance, yes, it is mandatory. There is no way to reduce the amount of insurance premium you pay each month, as it is a set rate and non-negotiable.

There are loan programs out there that offer lower than 20% down payment without mortgage insurance. Your best bet is to express your concerns to an experienced mortgage lender and ask if you qualify for any loan program that does not require mortgage insurance.

If your loan requires mortgage insurance, once you have 20% equity in the home, you may be able to have the mortgage insurance removed. Not all loan programs allow this, so be very clear on the terms and conditions of your loan. Do your homework upfront and ask lots of questions so that you know exactly what you can and cannot do in regards to the mortgage insurance. Best if luck to you! Kathleen Turner
0 votes Thank Flag Link Thu Nov 15, 2012
If the loan you qualify for requires mortgage insurance, yes, it is mandatory. There is no way to reduce the amount of insurance premium you pay each month, as it is a set rate and non-negotiable.

There are loan programs out there that offer lower than 20% down payment without mortgage insurance. Your best bet is to express your concerns to an experienced mortgage lender and ask if you qualify for any loan program that does not require mortgage insurance.

If your loan requires mortgage insurance, once you have 20% equity in the home, you may be able to have the mortgage insurance removed. Not all loan programs allow this, so be very clear on the terms and conditions of your loan. Do your homework upfront and ask lots of questions so that you know exactly what you can and cannot do in regards to the mortgage insurance. Best if luck to you! Kathleen Turner
0 votes Thank Flag Link Thu Nov 15, 2012
Mortgage Insurance is compulsory when you have not put down a full 20% when buying your home. I'm guessing you have an FHA loan that only required you to put down 3.5%.

Mortgage Insurance cannot be reduced but once you've got 20% equity in your home (either because of the payments you've made or because the home has appreciated in value or a combination of both) then you can request that it be removed and the lender will have the home appraised to confirm that you have at least 20% equity based on the homes current value. It will automatically be discontinued at a specific date which was listed in the mortgage documents you signed and which your closing attorney should have pointed out to you at closing.

II would suggest you contact your closing attorney and ask them about this. I ould also suggest trying to add another $100 each month to your payment and note it to be applied to your principal. This will help get you to the 20% equity required much more quickly.
0 votes Thank Flag Link Thu Nov 15, 2012
Most lenders require mortgage insurance if you are putting less than 20% down on a mortgage. There are certain loan programs and certain lenders that have programs that do not require mortgage insurance.

If you do not yet have a buyer's agent to help you navigate this or other concerns, please feel free to give me a call.

Blessings upon you...
Jan Teel
TEEL Realty
704-641-0267
0 votes Thank Flag Link Wed Nov 14, 2012
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer