Showing posts with label Removing PMI. Show all posts
Showing posts with label Removing PMI. Show all posts

Private Mortgage Insurance (PMI) Kentucky Mortgage and PMI

Kentucky Mortgage and PMI Breaking down PMI

PMI can be a nominal price to pay for being able to secure a home loan with today's mortgage rates.
What is PMI?

For homeowners who put less than 20% down, Private Mortgage Insurance or PMI is an added insurance policy for homeowners that protects the lender if you are unable to pay your mortgage.

It is not the same thing as homeowner's insurance. It's a monthly fee, rolled into your mortgage payment, that’s required if you make a down payment less than 20%. While PMI is an initial added cost, it enables you to buy now and begin building equity versus waiting five to 10 years to build enough savings for a 20% down payment.

While the amount you pay for PMI can vary, you can expect to pay approximately between $30 and $70 per month for every $100,000 borrowed.

*Assuming an insurance rate of 0.51%; this cost can be cancelled from your payment once you reach 20% equity in your home for conventional loans, but not FHA loans

**Does not include property tax and homeowner’s insurance payments
PMI isn't forever

Once you've built equity of 20% in your home, you can cancel your PMI and remove that expense from your monthly payment. If you're current on your mortgage payments, PMI will automatically terminate on the date when your principal balance is scheduled to reach 78% of the original appraised value of your home. If you choose to use PMI, be sure to talk with your lender about these specific details of your policy.

Talk with your lender about what down payment makes the most sense for your financial situation. Remember, you have options!

Removing PMI on Kentucky Conventional Mortgage Loans

Removing PMI on Conventional Loans

  1. Automatic – Occurs when a borrower hits 78% LTV of the scheduled amortization. Cannot be used if borrower pays down balance to get to 78% faster than scheduled.
  2. Borrower requested (original value) – Most often occurs when a borrower pays down a balance faster than scheduled and requests PMI to be removed based on the value used at closing.
  3. Borrower requested (new value) – Occurs when a borrower requests PMI removal based on a new appraised value, and the loan has been open for at least two years.
Here are additional information about requirements that may or may not be required when a Homeowner is removing PMI on Conventional Loans.
The Homeowner should always consult their Servicer before taking any action, including ordering an appraisal. In most cases, the Servicer will need to order the appraisal themselves or they could have additional overlays/restrictions for removing PMI on Conventional Loans.
Removing PMI on Conventional Loans

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Mortgage Insurance or PMI Guide for Kentucky Home Mortgage Loans

Private Mortgage Insurance or PMI Guide for Kentucky Home Mortgage Loans

Borrower-Paid Monthly (BPMI)
  • BPMI permits the borrower to pay the MI premium monthly, or as a single up front premium.
  • You can finance the single premium into the loan.
  • BPMI helps lenders offset the risk of a low down-payment mortgage.
  • Borrowers can qualify for a loan with a smaller down-payment, enabling them to purchase a home sooner.

Lender-Paid (LPMI)
  • Benefits the borrower and lender
  • With LPMI, the lender pays the MI premium on behalf of the borrower. Thus allowing the lender to charge a slightly higher interest rate on the loan.
  • In addition to increasing loan volume, LPMI lets you realize additional servicing profits through secondary marketing execution. Benefits include:
  1. Potential to originate larger first mortgages, resulting in higher servicing values
  2. Increase retention rates and repeat loan transactions through higher customer satisfaction
  3. Risk-based pricing options can offer even better rates for credit-worthy borrowers
  • Benefits to the borrower
  1. Lower down-payment needed
  2. Possibility of qualifying for a larger loan without increasing monthly payments

Borrower-Paid Single Premium
  • A single premium is a MI product that can be financed, paid using seller concessions, other contributions, or paid out of the borrowers own funds.
  • Saves the borrower significant money on the long term cost of MI. If it is financed it is also tax deductible because it is financed into the loan.
  • The cost of MI overall usually equates to four-five years of premium. In some cases, with credit score buckets, it can be much less.

  • By splitting the MI cost into an upfront premium and a smaller monthly renewal, split MI dramatically reduces a borrower’s monthly MI payment.
  • Split-monthly can help the borrower qualify for a larger loan while generating higher profits for the lender.
  • Split-MI can give you a competitive advantage over the competition by lowering the monthly MI. The monthly MI may be reduced by paying an “upfront premium” to buy down the monthly MI. The upfront premium may be financed: paid using seller concessions, lender credits, or paid in cash at closing. You can use a combination of these options to cover the up front premium.
  • The upfront split premium counts in points and fees just like single premium MI.
  • May be used as a strategy to help reduce a DTI over 45 to avoid a price adjustm

If you want a personalized answer for your unique situation call, text, or email me or visit my website below:

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.
10602 Timberwood Circle 
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708


If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.   
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant  Equal Opportunity Lender. NMLS#57916
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