When it comes to mortgage insurance (MI), homeowners typically have questions. Your mortgage professional can address these questions in greater detail, but the below should assist you in understanding the basics.
Q: What is monthly mortgage insurance (MI)?
A: MI is designed to compensate the lender should a homeowner ever default on the home loan. Generally a loan has MI when the down payment amount is less than 20% of the purchase price of the property. Homebuyers benefit from MI because it could improve their purchasing power, getting them into a home quicker.
Q: When can I cancel or remove MI from my loan?
A: It depends. Typically, for conventional loans, if a homeowner is up to date with their monthly payments and their mortgage is scheduled to fall to 80% loan to value, the homeowner may request the removal of MI. Other loan types have different requirements for MI removal.
- FHA loans have an upfront and annual monthly insurance premium (MIP). The upfront mortgage insurance is financed into the loan amount and the annual MIP is paid monthly. The monthly mortgage insurance premium (MIP) may be canceled based on several factors such as; loan term, loan-to-value (LTV), or regulations when the loan was closed, but most annual MIP is paid through the life of the loan if originated (Case Number assigned) after 6/3/13. Ask us for details if your loan originated prior to 6/3/13.
- VA loans have an upfront Funding Fee financed into the loan amount (unless the Veteran is exempt) but there is no monthly MI applied to a VA loan.
- USDA loans have an upfront and annual Guarantee Fee. The upfront Guarantee Fee is typically financed into the loan amount and is paid throughout the life of the loan regardless of loan-to-value.
- MI for Jumbo loans varies by loan product. Ask for details.
- MI on conventional loans will automatically terminate under certain conditions, typically when the LTV reaches 78% based on the original purchase price. A homeowner can request MI cancellation under certain conditions at 80% LTV. Ask us for details.
If you have questions about obtaining a new loan or adjusting your current MI, reach out to an experienced loan officer for answers.
*Information is valid as of 09/16 but is subject to change.