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What is Private mortgage insurance (PMI)
Most lenders now require PMI whenever they lend more than 80% of the appraised value of the property. Some lenders will even lend as much as 95% of appraised values long as the borrower secures PMI. PMI can help you buy a house by enabling you to make a smaller down payment than you would otherwise make. Because many lenders forbid the borrowing of any of the down payment, you wouldn?t have to tap all of your savings accounts and all of your savings accounts to come up with a down payment. You could come up with it yourself comfortably. By making a down payment which is only a small percentage of the price, you?d also be able to buy a bigger house than your savings would otherwise warrant even though you could well afford to make large monthly payments. Of course, PMI does cost the borrower something. There?s a
start up fee roughly equal to the annual premium, and an annual
premium amounting to between 0.6% and 3% of the total loan. On a
$100,000 loan with a PMI premium of 0.6%, for example you would pay
$600 at the close of escrow and $50 per month thereafter. You pay
the premiums directly to the lender along with your loan
payments.
Most lenders will allow
you to terminate PMI when your loan balance is 80% of the value of
your house or less, a requirement which may be met by a reduction in
the loan balance itself and/or by application in the value of the
house. Should you believe that
your loan balance is low enough to warrant the cancellation of your
PMI, contact your lender and find out what you need to do for lender
to drop the PMI requirements on your loan. With the requirement
dropped, you?ll save having to pay the PMI premiums every
month. How to Calculate
PMI By Loan
Program: General Overview of
PMI:
OWNER
OCCUPIED
NON-OWNER
OCCUPIED O/O NO/O 80-85 85-90 90-95 95-100 .52 .78 .98 1.25 Example:
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