PMI Insurance

Many first time home buyers and people who have a high debt to income ratio may often be told that the only way they can get a loan to purchase a home is to buy PMI Insurance The initials stand for Private Mortgage Insurance and it is a policy designed to cover the lender in the event that the mortgage is not paid.

The insurance is required if your loan is for more than 80 percent of the value of the property. That means that if you have less than a down payment of at least 20 percent of the homes cost, you will be forced to take out this insurance.

The PMI Insurance policy is designed to protect the lender and to make it easier for a potential homeowner to get into the home they want sooner without the need to accumulate a large sum of cash as a down payment.

The cost of this PMI Insurance can range from several hundred to several thousands of dollars per year added to the mortgage payment. For the person borrowing the money, over a period of 30 years which is the term of most mortgages this can add up to a lot of money.

Once the equity of the property has risen to where you have more that 20 percent of the value in equity, you can request that the PMI Insurance be removed from your loan and that can drop your monthly mortgage substantially. As of January 2000 any residential loan of less than $252,000 qualifies for the insurance.

Loans above that price can be declared a high-risk loan and special steps must be taken to qualify for the PMI Insurance under the new designation. It doesn’t mean you won’t get it, it doesn’t mean that it will be determined as a higher than normal risk loan. It merely means that it can be.

PMI Insurance can be canceled once the equity value brings your value to 80 percent and you also have to be current in payments and have a record of late payments in excess of 30 days late for the year preceding the application or more than 60 days late in the preceding two years and you are not allowed to have a second or third mortgage on the property.

Once your value drops to 78 recent of the homes value, you are automatically taken off of the PMI Insurance program and your monthly mortgage payment reduced accordingly. If it has been a high-risk loan the value has to be reduced to 77 percent at this time to have the PMI Insurance automatically removed without your need to request that the lender remove it from your loan.

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Pmi Insurance

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PMI Insurance

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