Financing in Louisville>Question Details

Mwk629, Other/Just Looking in Louisville, KY


Asked by Mwk629, Louisville, KY Wed Mar 24, 2010

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Lots of numbers here, PMI is avoided if the initial loan is 80% or less. Otherwise David is correct, it is required to automatically be dropped when the loan amount equals 78% of the original purchase price or appraised value if it was initiated on a refinance transaction. In the Louisville area there are still HELOC’s and fixed seconds for 5% of the purchase price when the first mortgage is no greater than 80%. If you are close to the 20% down figure that may be an option. If anyone is aware of 10% source in the area, please share. I think most investors have eliminated the 2 year/new appraisal release option. And the automatic 78% is only if the borrower has been current on the mortgage payments. If not, the lender can require PMI to remain until as much as 50% of the original loan amount has been paid and even then the loan must be current.
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0 votes Thank Flag Link Wed Mar 24, 2010
PMI, or I should say MIP, FHA required mortgage insurance premium may be slightly less monthly if you put a little more down 50 bps vs 55 bps annualy. If you put 10% sown on a 15 year term you don't have any monthly ins. A 15 year term loan with FHA always has a monthly premium less than half of the 30 yr term loan, even when you put less than10% down. The 30 year loan however has up front and monthly even if you put 50% down. Your Mortgage person will generally recommend and FHA for other reasons when you have a large downpayment. It may be because of a lower credit score or lack of stability of employment, or 100% monies being gifted funds. You can also avoid PMI altogether with a conventional loan if you qualify, and can put at least 10.1% down. Piggy back loans ( 1st and 2nds combined) still exist. You need to shop for it. I am still writing them myself but many lenders have stopped. Be persistant. REMEMBER come April 5th the UFMIP (up front mortgage insurance premium) on FHA goes up to 2.25% from 1.75% presently, on purchases. If possible get your applications in prior to March 30th. Your lender has to obtain the FHA case number prior to April 5th to avoid the higher premium.
0 votes Thank Flag Link Wed Mar 24, 2010
There used to be a great deal of randomness regarding how PMI is handled. Thanks to some legislation from a few years ago, the process is more standardized. Once a minimum of 24 monthly payments have been made, the homeowner can petitiion the then seller/servicer to have PMI removed. This can involve a large principle reduction payment and/or a new appraisal. The loan to value (LTV) needs to be 78% or less at the time. Ton brings up a good point regarding FHA. To add to his comment, the monthly MIP (Mortgage Insurance Premium, which is FHA's version of PMI) will be terminated after 11 years, if a request has not been made sooner.
0 votes Thank Flag Link Wed Mar 24, 2010
All these responders are correct but one thing they left out is that the bank/ lender has the right to leave the PMI on the loan if you have not been on time with your payments. It is up to them to allow it to be removed
0 votes Thank Flag Link Wed Mar 24, 2010
PMI shouldn’t last he entire length of the loan. I think FHA requires a minimum of 5 years before you can petition to have it removed after reaching 80% loan to value. Some have also raised the initial premium. Avoid it if you can, save more (20%) or spend less. Make sure the agent you select to represent you understands your financial goals and is working to help you achieve them with what will most likely be your biggest purchase.
0 votes Thank Flag Link Wed Mar 24, 2010
PMI is added on to your monthly payment when you are putting down less than 20% when you purchase. Once you have built enough equity on your home from your mortgage payments you can request that the lender waive the PMI mortgage insurance premium. If you are just purchasing you wil not be able to do that for a few years.Just pay your mortgage on time monthly, & watch home values in your neighborhood every year until then.
0 votes Thank Flag Link Wed Mar 24, 2010
for many borrowers, yes, PMI can last the entire length of the loan. The lender is more than happy to allow you to pay for insurance that pays them, if you default on the loan for 30 years.

But if you're paying attention, once your "equity reaches 20%" (in some cases slightly more) of the value of the home... you can request of your lender to drop the PMI.
0 votes Thank Flag Link Wed Mar 24, 2010
Alan May, Real Estate Pro in Evanston, IL
It can unless you reach 80% loan to value then YOU must request the pmi be dropped. You can reach this level be making payments so that the amount you owe is 80% of what the value is or when values start to increase, your loan amount goes below 80% of what the property is worth. Some cases they will ask for an appraisal which is a small cost to save a bundle.
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0 votes Thank Flag Link Wed Mar 24, 2010
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