An easy way to help your buyers save money

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09/15/2015 | Author: Editorial Staff

Private mortgage insurance, or PMI, is usually required when homebuyers have a downpayment less than 20% of the sales price or appraised value of a property. But homeowners who pay extra toward their principal may not realize they could be eligible to terminate their mortgage insurance earlier than they think. Let your buyers know they can request to cancel their coverage if they meet certain requirements, including:

  • The principal balance of the mortgage reached 80% of the original value of the home
  • A good payment history
  • Current on the loan

Note that even if homeowners meet these and other requirements outlined in the act, they should also review the terms of their policy, which may have conditions related to cancelation. In addition, Federal Housing Administration loan borrowers must pay PMI for as long as they have the loan.

Lenders are legally required to automatically terminate mortgage insurance when the principal balance of the loan reaches 78% of the original value of the property. However, lenders sometimes inadvertently collect money after the termination date, so it’s important for homeowners stay aware of their payment progress even if they aren’t trying to speed up the process.

Make sure your clients know actions they can take to terminate their private mortgage insurance. Get more information from the Consumer Financial Protection Bureau’s recently released compliance bulletin.

Categories: Business tips, Homeowners
Tags: homeowners, buyers, private mortgage insurance, cfpb


Comments

Phil on 09/15/2015

VA Does NOT require MI.  That is one of the advantages.  I’ve used mine 3 times. 

FHA only made MI LIFETIME about 1.5 years ago. 

It used to drop off after you had 20%.  I was surprised to see SWBC tell me that I needed 25% equity on my FHA loan if the loan was less than 5 years old.  And their “Delay” tactics were reprehensible as well. 

Mike F on 09/15/2015

TO clarify the FHA MIP.  If the LTV is greater than 90%, the MIP is for the life of the loan.  If the LTV is less than 90% it is for 11 years but if you are putting more than 3.5% down, it makes no sense to go FHA if you can qualify for a conventional loan because of the high FHA funding fee.

Paula alcala on 09/15/2015

Only conventional loans drop the PMI after the 20% is paid off.  FHA, USDA and I believe VA charge it throughout the life of the loan.

Mike F on 09/15/2015

FHA and USDA now require PMI for the life of the loan.  This is only good for conventional loans

Phil on 09/15/2015

I recently inquired with my mortgage company (SWBC) about removing MI because I am confident that I have 20% equity.  Their policy was they would contact me within 30 days via writing to tell me how to go about requesting the elimination of MI.  I did take right at 30 days for the letter to arrive.  I thought this was a deceptive tactic designed to distract homeowners.  But at any rate, the letter informed me that if I had owned my mortgage less than 5 years, I would need 25% equity to remove the MI.  So now I will wait until early next year. 

I assume they are within their legal rights to ask for 25% based on what I signed 3 years ago .  Any comments. 

Lilly Hughes on 09/15/2015

Oops. I thought FHA had changed to the lifetime of the loan.


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