February 21st, 2016 5:14 PM by Sam Kader
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).
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:
If you have a problem with a lender over
PMI cancellation, contact the Federal Trade Commission and Washington
state's attorney general.
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