HOW TO GET RID OF YOUR MORTGAGE INSURANCE – MI & PMI

By E. Vernon Small

Mortgage Insurance is required on conventional and FHA loans if the loan to value of the loan amount exceeds 80% of the value of the home.  It is an insurance policy that covers the lender in case of default or loss when the loan balance exceeds the property value.

Unfortunately, most homeowners will have to refinance their current loan to remove mortgage insurance.  Below is a guide that simplifies the most common options.

FHA Mortgage Insurance Removal

• If you obtained an FHA loan BEFORE June 2013, you CAN request to have the Mortgage Insurance removed after 5 years and your loan is less than 78% of the current market value of the home.
• If you obtained an FHA loan AFTER June 2013, the Mortgage Insurance is in place for the first 11 years on a 15 year mortgage, and for the life of the loan on 30 year mortgages.  The only way to remove Mortgage Insurance on FHA loans obtained after June 2013 is to refinance the loan.

How to Avoid Mortgage Insurance on a Purchase

• 20%+ Down Payment
• 10% Down Payment - Apply for a 1^st mortgage at 80% and a 2^nd mortgage at 10%
• 3% Down Payment - Purchase a home under Home Path Program –Available for Fannie Mae foreclosed homes only
• 3% Down Payment - VA Loan (Veterans Administration) – Available to past and current military personnel

How to Avoid Mortgage Insurance on a Refinance

• Home Affordable Refinance Program (HARP) –Available only to homeowners currently in a Fannie Mae or Freddie Mac Loan
• Have at least 20% equity in the property
• Refinance with a 80%-10% 1^st and 2^nd Mortgage – Available for those with 700+ credit scores
• Apply for a VA Loan (Veterans Administration) – Available to past and present military personnel

Other things to consider:

• In some cases you are entitled to a refund of the ‘unused’ portion of your insurance premium when refinancing to another loan.
• Choose the right lender for your area/county.  The aggressiveness of banks can vary county to county.
• Properly prepare your home for the appraisal inspection- There are simple things that homeowners can do that may increase the appraisers opinion 5-10%   

E. Vernon Small can be reached at info@theloanexperts.com