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Buyers who put down less than 20 percent down payment are required to pay Private Mortgage Insurance (PMI). We have a special program to avoid paying monthly PMI. Please consult with us. The Homeowners Protection Act of 1999 requires lender to inform borrower when they can cancel coverage. On August 4th 2015 - the CFPB bulletin further clarifies some requirements of the Homeowners Protection Act and is intended to help servicers comply with the law but does not create any new rules or requirements.
1) PMI can also be cancelled once the loan to value is 80 percent or less base on the original purchase price or appraised value - whichever is less.
Automatic cancellation can also happen once 22 percent equity is reached (for mortgages with terms of 30 years or more).

2) PMI may cancelled during the first 5 years under the following conditions - mortgages with terms of 15 years or less and the LTV reaches 78% or less. In order to determine whether the threshold has been reached according to the Federal Reserve Board:

a) Multiply the present value of your mortgage by 1.25.
b) Ascertain the purchase price or appraised value of your property.
c) If the value in step a is larger than b, PMI will continue. If the value in step a is smaller than b, you may request PMI cancellation. 

3) Get a new appraisal instead of the original purchase price or appraised value when deciding whether you have 20% equity threshold.

4) Remodel to increase value such as adding a room, kitchen or bathroom  upgrades. Then ask the lender to recalculate your Loan-To-Value (LTV) ratio using the new value figure.

In January 2015 - FHA announced that FHA mortgage insurance is now required for life of the loan. The only way out is to wait until you have 20% equity and to refinance into Conventional Financing.  

Here's what you should do to request PMI cancellation:

  1. You must request for cancellation in writing.  You should receive an annual letter from mortgage servicers who to call for information about cancelling mortgage insurance.
  2. You have to be current on your payments and have a good payment history.
  3. You must not have any subordinate liens of your property.
  4. You might have to get an appraisal to demonstrate that you have at least 20% equity. Estimate how much your house is worth using Zillow or contact me for a copy of your Comparative Market Analysis.

If you have a problem with a lender over PMI cancellation, contact the Federal Trade Commission and Washington state's attorney general.

 

Posted by Sam Kader on February 21st, 2016 5:14 PM
FHA has recently published Mortgagee Letter 2015-01 implementing the reduced annual mortgage insurance premiums effective for case numbers assigned on or after January 26th, 2015. FHA will temporarily approve cancellation requests for active case numbers within 30 days on the effective date of this Mortgagee Letter. 
  • Annual premium is reduced 50 basis points on both purchase and refinance transactions.
  • Applies to all FHA loans w/ terms greater than 15 years
    • There is no change in premium on 15 year or shorter terms
  • All loan types are affected except streamline refinances that are refinancing existing FHA loans endorsed before May 31, 2009
    • Hawaiian homelands (Section 247) are also excluded.
  • There is no change to the upfront premium or the life of loan requirement - currently at 1.75%.

Call me if FHA financing is the best for you.

Posted by Sam Kader on January 12th, 2015 3:56 PM

 

Recent HUD announcement to increase its annual mortgage insurance and mortgage insurance for the life of the loan makes the decisions to go conventional a bit easier (if one can qualify). Here are some pointers for conventional with Private Mortgage Insurance (PMI):

  • 700 FICO score, 3% down, 45% maximum Debt-To-Income (DTI) on Owner Occupied (OO), Single Family residence (SFR).
  • 660 FICO score, 5% down, 45% max DTI on OO, SFR/Warrantable Condo.  
  • 700 FICO score, 10% down, 45% DTI on second home (must be located in resort/vacation area).
  • Collections may be required to pay.
  • Bankcruptcy requires 4 years since the date of discharged.
  • Adjustable Rate Mortgage (ARM) - DTI is capped at 41%.
  • Manually underwritten files - 10% down is required.
  • Full appraisal is mandatory.
  • 3 - 4 unit properties are ineligible.
  • Interest Only (IO) loans are ineligible.
  • Homeowners with prior claims are ineligible.

3% gift funds is allowed provided that:

  • Max DTI is 41%
  • 740 FICO score is required.
  • Fixed-rate loans only.
  • SFR only.
  • OO only.
  • No subordinate financing allowed.

Please be advised that the files will require closer scrutiny from the lender as well as the mortgage insurance company. Pacific Coast Financial will pre-underwrite the files internally to ensure that our files will be approved.  Each borrower is unique. Please call or email us for free consultation.

Posted by Sam Kader on February 17th, 2013 5:17 PM

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