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I was speaking with a loan officer today on the phone in the state of Utah. This person asserted that PMI is required for a minimum of 3 years no matter the increase in equity. This didn't sound right to me at all. I am aware that the law changed recently for PMI on FHA loans; it's now required for the life of the loan. But conventional, 3 year minimum? And they claimed this is industry wide.
Guidelines for Fannie Mae and Freddy Mac are a minimum payment history of two years and a 75% loan to value percentage. The fact of the matter is that the bank isn't required to remove the PMI before the termination date.
So even if my equity goes up, whether by extra payments by me, or some other economic event that causes home values to surge, I still have to pay for that lender's minimum of 3 years?
Two years is common on conventional loans. I work in the mortgage department of a bank and have specifically worked in the PMI department. We have to keep our investors happy. Fannie Mae and Freddy Mac want a minimum of two years. I'm not sure where the 3 years is coming from. If it's before your scheduled termination date, it's completely up to the lender. My advice is don't expect to have PMI removed early. Consider it a bonus if you get it removed early.
Read the fine print. It says no 60 day lates in the past 24 months. That's why Fannie and Freddy and want at least 24 months. Removing PMI early is never easy.
Ok I see, that's where the 2 years comes into play. So is my lender just tacking on another year? Can they do that?
If it's before the scheduled termination date on your PMI disclosure, they are under no obligation to remove it. These are guidelines to remove it early. They are not requirements or laws.
Is this a loan broker you are working with? I have found brokers are clueless with PMI. They just originate the loan and sell it. In fact today I had a customer angry since her broker said she could have PMI removed after 6 months on an FHA loan.
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