Private mortgage insurance (PMI) is an insurance policy required by mortgage companies to cover their losses if a Pennsylvania home buyer defaults on their mortgage. When the lender goes to sell a property, they are unlikely to recoup the total remaining balance on the loan. PMI applies to first mortgages where the home owners are obtaining over 80% of the sale price of the property. There is customarily an up-front PMI fee due at closing and monthly fees based on a percentage of the loan amount. Pennsylvania financing PMI explanation and recommendations on eliminating PMI are detailed below.
PMI rates depend on the type of loan. Pennsylvania home owners should consult with a mortgage professional to obtain accurate rates and analyze the impact that it will have on recurring mortgage payments. Rates can also change at certain times, so be sure to get up-to-date figures when you are assessing the affordability of a home purchase. Once you obtain a loan, the PMI rate for that particular mortgage will never change for the life of that loan. With certain loans, such as FHA, you may request a refund of a portion of the up-front PMI charged at closing if you refinance within a certain period of time.
Recommendations on Eliminating PMI
Monthly PMI fees will typically disappear when the mortgage is paid down to 80% of the beginning purchase price. Most lenders allow removal of PMI a few percentages earlier if requested by the homeowner when that percentage mark is reached. Refer to your closing documents for the percentages that apply to your mortgage. In an inclining real estate market, homeowners can also order a new appraisal (from a vendor approved by the mortgage company) to illustrate that the value of the home has improved and that you may have therefore reached the 80% mark earlier than expected.
Pennsylvania Financing PMI Explanation
Most home buyers are unable to provide a 20% down payment and therefore cannot avoid PMI. By understanding how PMI works and how to eliminate it, Pennsylvania home buyers can realize significant savings. We hope that you found this Pennsylvania financing PMI explanation useful and will be able to use the recommendations on eliminating PMI.