Let Yellow Rose Appraisals help you learn if you can get rid of your PMIA 20% down payment is usually accepted when purchasing a home. Since the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a purchaser doesn't pay.During the recent mortgage boom of the mid 2000s, it was widespread to see lenders only asking for down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in case a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. It's lucrative for the lender because they collect the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the losses.
How home buyers can keep from bearing the cost of PMIThe Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook ahead of time.It can take several years to reach the point where the principal is just 80% of the original loan amount, so it's necessary to know how your Texas home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home might have secured equity before the economy declined. So even when nationwide trends hint at decreasing home values, you should understand that real estate is local. An accredited, Texas licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Yellow Rose Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Gunter, Grayson County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often drop the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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