PMI* Removal - Step By Step
* PMI stands for "Private Mortgage Insurance". A popular money saver for homeowners in the last few years is to get the PMI removed from their mortgage loan, thus saving them money on their monthly payments.
All home buyers can benefit. It allows them to become homeowners sooner, and it dramatically increases their buying power excellent benefits from a buyer's perspective. First-time buyers can use a low down payment to help them afford their first home, or to purchase a more expensive home sooner. Repeat home buyers can put less money down and gain significant tax advantages because they will have more deductible interest to claim. They can also use the cash they would have used for a large down payment for investments, moving costs or other expenses. Click HERE for a PMI Video
When Is PMI "Required?
When a lender makes a homeowner a loan that is above 80% of the home's value the lender is required by federal regulations to insure that portion of the loan that is above 80%. Guess who pays for it? You, the consumer, of course. However there is no need to pay for it for the life of your loan.
Can I get rid of the PMI on my loan?
Once your mortgage loan amount falls below 80% of the value of your home, and you have made your payments on time for two years, you can apply to your lender to have the PMI removed from your loan, which will make your monthly payments go down.Step 1 - Contact your lender
Lender criteria varies widely for PMI removal. Your first step is to contact your lender (the company you send your payments to). Contact information should be on your payment stub or invoice. Request a letter outlining the specific requirements your loan must meet in order to qualify for PMI removal. If you don't know your current loan balance or the amount of equity needed to meet their loan-to-value (LTV) threshold, be sure to ask them for that information.
An important point we would like to stress is that if your lender says your loan balance should be below 80% of your home's value. That is your home's current value, which is not necessarily what you paid for your home. So it doesn't mean that your loan balance has to be below 80% of the original sales price. Paying down the loan via monthly payments is one way to decrease the loan to value ratio, however your house may have appreciated in value since you purchased it. In addition if you have made significant improvements to your home the value may have increased.
Step 2 - Do You Qualify?
We are using the figure of 80% because it is a rule of thumb. Check with your lender for their specific requirements. There are literally hundreds of loan programs, all with different requirements so make sure, before you do anything, that you review YOUR lender's "PMI Letter".
If you have paid off at least 20% of your original loan amount there should be no need to establish your home's current value. However, if you think you meet your lender's LTV requirements based on appreciation in value since you purchased your home or if you have made significant improvements to your home, the lender in most cases will require an appraisal.
If you're not reasonably confident that your home's current value meets your lender's requirements you'll need to do some "homework". Maybe you feel like you don't need an "appraisal" at this stage, but you'd like some help gathering local property and sales data. At Brian J. Davis & Associates we provide low cost sales and listing reports that will guide you through the maze of raw data. Our reports transform confusing market data into charts and graphs full of information that you can use to make an informed decision and decide if you need to order a "full appraisal".
Our "Neighborhood Sales Data" reports are NOT appraisals but rather custom sales data reports designed to help YOU to determine for yourself if you have sufficient equity in your home to have your PMI insurance cancelled. This is a preliminary step. The fee for your Neighborhood Sales Data Report will be credited towards your PMI Appraisal fee if the appraisal order is placed within thirty days.
Step 3 - Get an appraisal
Once you've checked with your lender and determined out that you are a candidate to have the PMI removed from your loan your lender will most likely tell you to get your home appraised. Brian J. Davis & Associates is experienced in helping folks just like you rid themselves of unneeded and unwanted PMI insurance.
Be sure that you request Brian J. Davis & Associates if the lender asks you for your choice of appraisal firms if you are located in McLean County, Illinois. More than likely we are already on their "approved list", and if not we will provide your lender with the necessary documentation to become approved.
Additional Information Regarding PMI Cancellation
Are you one of the million U.S. homeowners overpaying their mortgage insurance?
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.