Let Clearfork Appraisals help you learn if you can eliminate your PMIA 20% down payment is typically accepted when buying a house. The lender's liability is often only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations in the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders making deals with down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the market price of the home is less than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they get the money if the borrower defaults, as opposed to a piggyback loan where the lender absorbs all the damages.
How can home buyers refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook ahead of time.
Since it can take several years to reach the point where the principal is just 80% of the initial amount borrowed, it's important to know how your Texas home has increased in value. After all, every bit of appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not follow national trends and/or your home could have secured equity before the economy cooled off. So even when nationwide trends hint at decreasing home values, you should know most importantly that real estate is local.
The hardest thing for many homeowners to figure out is just when their home's equity rises above the 20% point. An accredited, Texas licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Clearfork Appraisals, we know when property values have risen or declined. We're experts at analyzing value trends in Fort Worth, Tarrant County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little effort. At which time, the home owner can relish the savings from that point on.
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