PMI Basics for
Consumers- Appraisers may help you remove PMI Insurance-
Contact a Qualified Appraiser today!
Private mortgage insurance (PMI)
protects the lender or investor against loss, not the home owner. If
you pay 5% down, the PMI company will insure, or guarantee, the top
10% of the loan. If you go into default, they will reimburse the
- Typically PMI is required for a
sale if there is less than a 20% down payment.
- Not all lenders require PMI,
even for low down payment loans.
- PMI protects the lender, not the
- PMI costs vary but are usually
0.5% of the loan amount for the first year of the loan, with
lower payments in later years.
- PMI is collected by the loan
servicer, and sent to the PMI company.
- PMI removal is based on both the
payment history and the value of the collateral (house).
- Early cancellation PMI removal
requirements vary considerably among lenders.
- There are only four companies
that offer PMI.
How to get PMI removed
Most, but not all, lenders will
remove their PMI requirements if:
- The loan to value ratio on your
loan is 80% or less. (Some require 75% or another LTV).
- You have made your payments on
time for two years.
Step 1 - contact your lender
Your first step is to contact your lender (the company you send
your payments to). Contact information should be on your payment
stub or invoice. Lender requirements vary widely on LTV, etc.
Step 2 - get an appraisal
Your lender will tell you which appraiser you can use.
Sometimes you can select your own appraiser. Sometimes the lender
chooses the appraiser. Note: you do not need an appraisal if you
have paid off at least 20% of your original loan amount.
If you can select your own appraiser and are located on Long
Island or in the New York City Metro area, we can help you.
Contact Merrell Institute for
Appraisers in your area. 631-563-7720.
Mortgage Insurance Companies of America (MICA) has a
PMI calculator and
other useful information.
How many homeowners have PMI?
According to the Mortgage Insurance
Companies of America, an industry trade group, 1,070,700 home buyers
got PMI in 1996. In the previous 5 years, about 1 million per year
had obtained PMI.
Although it would seem like making it
easier for home owners to get their PMI canceled would decrease the
incomes of the MI companies, only about 5% of outstanding policies
would be affected.
How much does PMI cost?
The cost varies, depending on percent
down, type of loan, and amount of coverage.
In general, looking at a sales price
of $119,000 for a home and a 30-year fixed rate mortgage, with 10%
down, the MI premium would be $45 per month. With a 5% down payment,
it would be $70 per month.
Originators, lenders and servicers
- who does what.
In today's market of originators,
funders, and servicers doing separate roles, many are confused about
who does what.
For example, you get a loan
originated by ABC Mortgage Company (mortgage broker), who markets
the loan to DEF Mortgage Company (funds the loan), who sells the
loan servicing - released to GHI Bank (who holds the loan in
portfolio), and your loan payments are made to XYZ Bank, a large
PMI cancellation is done by servicers.
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