TribLIVE

| Business


 
Larger text Larger text Smaller text Smaller text | Order Photo Reprints

Private mortgage insurance could be required on home loan

On the Grid

From the shale fields to the cooling towers, Trib Total Media covers the energy industry in Western Pennsylvania and beyond. For the latest news and views on gas, coal, electricity and more, check out On the Grid today.

By The Los Angeles Times
Wednesday, Jan. 2, 2013, 5:06 p.m.
 

If you're getting a home loan, the lender may require you to pay for private mortgage insurance, or PMI. Here are some key things to know about PMI and how to get rid of it:

• PMI is typically required by lenders on mortgages in which the borrower is making a down payment of less than 20 percent. It is designed to protect the lender in case the borrower defaults. On a loan of $250,000, PMI may cost you $50 to $220 per month, depending on the size of the down payment and the length of the loan.

• Once you've made enough payments to boost your equity to 20 percent of the original purchase price, you can ask your lender to cancel PMI. By law, the lender must cancel PMI at this point as long as you have a history of on-time payments, you can establish that the property value has not declined, and there is not a subordinate lien — such as a home equity loan — on the property.

• If you can't get PMI removed at the 20 percent level, it gets easier once you reach 22 percent equity (based on the original purchase price). At that point, the lender must automatically cancel PMI as long as you are current on your payments. For certain loans defined as “high risk” by the lender, you must wait until you reach 23 percent equity.

• If you're unable to get PMI removed by either of the above steps, the lender must cancel it once you are halfway through your loan term, provided you are current on your payments.

• The PMI cancellation rules, as defined in the federal Homeowners Protection Act, apply to mortgage loans made since July 29, 1999. But they do not apply to loans made by the Federal Housing Administration or Department of Veteran Affairs. If you have a problem with a lender over PMI cancellation, contact the Federal Trade Commission and your state's attorney general.

 

 
 


Show commenting policy

Most-Read Business Headlines

  1. Real estate union: Howard Hanna buys Langholz Wilson Ellis
  2. Energy sector adjusts to global oil plummet
  3. Agriculture prospects envisioned in Cuba
  4. ‘Staff Pick’ is golden ticket on Kickstarter
  5. Mind the time: Optimize last-minute shopping
  6. Kim Komando: Can you get a virus on your smartphone?
  7. Drought opens Texas ranchers’ eyes to income options
  8. 3 tips to use up health account funds
  9. Makers of wine corks have lost ground to screw tops
  10. ExOne Co. moves solidify authority under CEO
  11. EPA says it won’t regulate coal ash as hazardous waste
Subscribe today! Click here for our subscription offers.