Real Estate Realestate Louisville KY Kentucky 502-777-9027 Homes For Sale Houses for sale in Valley Station PRP Pleasure Ridge Park Shively Taylorsville Lake Area Spencer County KY Auburndale Fairdale Iroquois Park Buechel Highview Okolona Fern Creek Hikes Point

What is PMI?

Why do I have to have PMI and when do I get rid of it?

    Some lenders differ on this issue. It seems like any lender is happy to lend to any homebuyer if they have so-so credit. Why? Because the loan is secured by the home itself. If a borrower defaults on a loan, the risk for the lender is usually only the difference between the value of the home and the amount outstanding on the loan, less the amount it costs them to foreclose and resell the property.

    That’s why some lenders require a down payment, which is a percentage of the home's value. In order to avoid PMI, the loan to value ratio must be at least 80% or below. This way the losses of the banks are smaller.

    Lately, increasingly more homebuyers are using nothing down or only 5% or less. Therefore, loaning this much presents the lenders with a lot more risk. To offset this risk and issues of default, the loans often require Private Mortgage Insurance, also known as PMI. This is a supplemental policy that protects the lender in case a borrower defaults on the loan and goes into foreclosure.

    PMI has been a large moneymaker for the mortgage lenders and financial institutions. The amount of the Private Mortgage Insurance ranges from $35-$60 per month for a $110,000 house - it is most always rolled into the mortgage payment. That is why the size of the overall total payment varies from lenders. Most of the time, this is overlooked and could cause someone not to qualify for a particular loan amount. PMI can change someone’s debt to income ratio figures easily. Most homeowners continue to pay the PMI, even after their loan balance has dropped below the original 80 percent mark or their loan guidelines.

    Some few years ago, lenders were under no obligation to tell homeowners when they had reached a point where the Private Mortgage Insurance can be dropped or terminated. That all changed in 1999, when the Homeowners Protection Act was placed on the books. This law now obligates lenders to terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. However, I recommend to check your loan balance frequently to ensure you are not paying for something that is not necessary. The law stipulates that, upon written request from the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. There are other ways you can qualify to drop the PMI as well, check with your lender for the guidelines.

    It is important to note that the law only applies to home loans - first time or refinances - that closed after July 1999. Check with your lender and search the web for more information on this law. Some people do not know that the lender looks at certain other conditions as well. The number one issue I found is being current on the loan payment.

If you call your lender on a regular basis, they can tell you what your loan ratio is, and when you can actually ask for the PMI to be removed, take it upon yourself to do so, do not wait for the lender to offer.

Email: Chris@ChrisSchlager.com

"My Dedication Makes Your Dreams A Reality!"

For information regarding residential homes, land or farm listings, and current real estate market conditions in the South End, Valley Station, PRP, (Pleasure Ridge Park), Shively, Auburndale, Fairdale, Iroquois Park, Buechel, Highview, Okolona, Fern Creek, Hikes Point, Bullitt County, Hillview and Spencer County, Taylorsville Lake area, Mt. Washington Kentucky, (Ky) state, I can also help you negotiate with *For Sale by Owner-FSBO's to get you the best deals on the residential market.

*Keep in mind that with For Sale by Owners-FSBOs homes, Kentucky State law does not require seller disclosures forms to be used. They are definitely considered "Buyers Beware Properties."

W. Tom Huber Realtors, LLC
3400 Historic Drive
Louisville, KY 40299
Office: (502) 551-6386
Direct Line to Chris: (502) 777-9027