Warning: Constant WP_CACHE already defined in /home4/comcompare/public_html/blog/wp-config.php on line 4

Warning: Cannot modify header information - headers already sent by (output started at /home4/comcompare/public_html/blog/wp-config.php:4) in /home4/comcompare/public_html/blog/wp-content/plugins/ip2location-country-blocker/ip2location-country-blocker.php on line 1984

Warning: Cannot modify header information - headers already sent by (output started at /home4/comcompare/public_html/blog/wp-config.php:4) in /home4/comcompare/public_html/blog/wp-content/plugins/ip2location-country-blocker/ip2location-country-blocker.php on line 1985

Warning: Cannot modify header information - headers already sent by (output started at /home4/comcompare/public_html/blog/wp-config.php:4) in /home4/comcompare/public_html/blog/wp-content/plugins/ip2location-country-blocker/ip2location-country-blocker.php on line 1986

Warning: Cannot modify header information - headers already sent by (output started at /home4/comcompare/public_html/blog/wp-config.php:4) in /home4/comcompare/public_html/blog/wp-content/plugins/ip2location-country-blocker/ip2location-country-blocker.php on line 1987
What Is Private Mortgage Insurance And How To Get Rid Of PMI | CC

What is Private Mortgage Insurance and How To Get Rid Of PMI

Amanda Byford
Follow Me

Private Mortgage Insurance (PMI)

When people are asking for an idea for their monthly payment or when they are online getting ideas, they always get a sense of what their payments are going to be.

However, once they talk to a realtor and the lender that is when they realize that there is some portion of the monthly payment is yet to add. And the silent killer of your monthly payment is usually the private mortgage insurance or PMI.

You initially think that your payment is going to be nice and low only to realize that it is going to be a few hundred dollars more than you thought it was. 

In this post, we will know more about private mortgage insurance and how you can get rid of it.

What is Mortgage Insurance and Why is it Needed?

Mortgage insurance has a long history in the lending market and with the government. Mortgage insurance started out after the Great Depression, as a way to encourage banks to continue to loan out money because they were hardest hit when people default.

With bad economic times, banks tend to lose lots of money, so mortgage insurance was created to encourage them to start loaning out again.

Essentially, it is a way for the banks to protect themselves from people to take mortgages, and in case if they default on their mortgage, the bank will get a large percentage of the amount back.

However, If you are paying it in cash, you don’t get the mortgage insurance.

Mortgage Insurance For FHA Loans

If you are getting an FHA loan, you are going to have mortgage insurance for the entire tenure of the loan. 

In FHA loans, the minimum down payment is 3.5%, and if you do 3.5%, you are going to finance with an upfront mortgage insurance premium.

This could be paid upfront too if you want to. However, most people would finance it into their home loan, and that percentage is 1.75% of the loan amount, which is amortized over the life of the loan.

You can always put 5% or more down on your house, and this will drop the mortgage insurance to 0.8% of the loan amount. 

And if you make 10 % on your down payment, you can clear your mortgage insurance in 15 years on a 30-year loan.

FHA loans are good options compared to conventional loans as the interest rates are comparatively lower, which makes the monthly payments more affordable, especially for people who have low to fair Fico scores.

Private Mortgage Insurance For Conventional Loans

With Conventional loans, if you have a great portfolio with good credit and job history, the loan officer can shop around for your private mortgage insurance (PMI) and possibly get you a better number.

There are multiple ways of constructing your private mortgage insurance (PMI) premiums on a conventional loan. 

You can buy private mortgage insurance upfront, which is a great option, especially if you have an excellent credit score because frequently that will give you the lowest monthly payments.

You also get an option in conventional loans where you can pay a portion of private mortgage insurance (PMI) upfront and remain in your monthly payments.

The other option you can get is to pay the entire private mortgage insurance (PMI) with your monthly payments. The best way to get rid of private mortgage insurance (PMI) is by making a principal reduction payment.

Paying the home loan down up until you get the 20% equity. Once you reach 20% equity, you will have to call your lender and request that your private mortgage insurance (PMI) gets removed.

Mortgage Insurance For VA Loans

VA loans don’t have any monthly premiums; they do have what is called a VA funding fee. This fee goes into a pot of funds that guarantees all VA loans.

You don’t have to pay VA funding fee if you are a disabled veteran at more than 10%. The premiums may vary depending on the military branch that you were in and if you have taken it out more than once.

Conclusion

No matter which loan you go for, it is always best to get multiple scenarios presented to you, because most people think that getting the lowest interest will have the most significant impact on your monthly payments.

You might want to talk to your trusted loan officer about how they structure mortgage insurance that will benefit you in the long run.

Amanda Byford

Amanda Byford has bought and sold many houses in the past fifteen years and is actively managing an income property portfolio consisting of multi-family properties. During the buying and selling of these properties, she has gone through several different mortgage loan transactions. This experience and knowledge have helped her develop an avenue to guide consumers to their best available option by comparing lenders through the Compare Closing business.

One thought on “What is Private Mortgage Insurance and How To Get Rid Of PMI

  1. I would like to express some thanks to the writer for rescuing me from this particular problem. Just after browsing throughout the the net and getting proposals which are not powerful, I assumed my life was well over. Living without the presence of solutions to the problems you’ve resolved all through your blog post is a critical case, and ones that might have negatively damaged my career if I hadn’t noticed your website. Your primary natural talent and kindness in taking care of all the stuff was precious. I’m not sure what I would have done if I had not come upon such a stuff like this. I am able to at this point look ahead to my future. Thanks a lot so much for your expert and result oriented help. I will not hesitate to endorse your web sites to any person who will need assistance about this situation.

Leave a Reply

Back to top
%d