what is private mortgage insurance and can you purchase a house without?

Answer 1

Private mortgage insurance comes into play typically when you have less than a 20% down payment on a property. What it is is insurance (which you pay for) that guarantees that if your lender has to foreclose on your property and they end up selling it for less than what you owe them, the Private mortgage insurance company will make up the difference. The only bad things are then that the private mortgage insurance company can go after you for a partial or full reimbursement to them for what they had to pay out. I had this happen to me a number of years ago. As for how you can purchase a house without it, easiest solution is to have a 20% down payment. Some lenders though have changed the rules regarding PMI, and only require it with less than a 10% down payment. There are also some first-time home buyer programs that don't require PMI either.

Answer 2

if a bank has to foreclose on a house because the owners don't pay their mortgage, it costs them a lot of money in real estate fees etc. typically you will be required to pay PMI until you have 20% equity (when the amount you owe is only 80% of the value of the house). This equity can come from paying down your loan balance and/or the value of the house going up or both.

PMI is an insurance policy for the bank, issued by a 3rd party company, if the bank forcloses your house and looses money due to real estate fees etc, then the private insurance will pay the bank back for the amount they lost.

if you have good credit there are some options for no-PMI loans without having a 20% down payment. Sometimes you can pre-pay a lump sum instead of monthly payments which will save you money in the long run, other times banks will wave the insurance but possible charge you more in interest.

Another posibility is an 80/20 loan, technically this is 2 separate loans, one for 80% of the price (usually fixed rate 30 years) and another loan for 20% of the price (usually ajustable rate with higer interest). These can work out but the terms on the 20% loan won't be as good and most of the time you'll pay more in extra interest and fees than if you just paid the PMI every month.

Answer 3

PMI is an insurance that the mortgage company applies in case you default on your mortgage. It is applied because you are probably financing more that 80% of the purchase price on the home. There are a couple of ways you can get a mortgage without it such as paying 20% down or financing the 20% on a separate home equity loan (though it will be at a higher interest rate).

Answer 4

PMI is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.

Cancellation

Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.

Answer 5

Private mortgage insurance insures that the lender's who experience losses from foreclosures will be compensated for at least a portion of the loss. It is required by the investors on loans where the borrower makes less than a 20% down payment. PMI is avoidable by doing an 80/20 combp package or obtaining a lender paid pmi option loan (LPMI).

PMI payments became taxable just this tax year and there is atime limitation on how long the PMI may be enforced so it is automatically waived that point for borrowers who maintain their loans in current condition.

Answer 6

If your down payment on a home is less than 20 percent of the appraised value or sale price, you must obtain private mortgage insurance, known as PMI, with your lender. This will enable you to obtain a mortgage with a lower down payment because your lender is now protected against any default on the loan.

Answer 7

PMI protects the lender, not the borrower, but in today's market, PMI companies want to do whatever they can to help borrowers. Put another way, if you walk, the PMI company loses X dollars. If they can help you negotiate a short sale, they lose less than X dollars. Call the PMI company and ask what help they can offer. The worst they can say is there is no help. But most PMI companies have redeployed employees over the past year to help lessen losses, so they'll have experienced people ready to help you if you call.

Answer 8

PMI is the insurance required by lenders for people who put down less than 20% .( due to higher default rates by people who put little down , so have little to loose by default )
If you put down 20% or more of the sales price , you will not be required to pay PMI .

Answer 9

Try going to this site, they have lots of information about this sort of stuff.