Confused on PMI (sales, insurance, mortgage)

[tigres13]

I am confused on the whole PMI aspect of mortgages. I understand that if you put down less than 20% of the purchase price, you are charged monthly for Private Mortgage Insurance. Is there a set percentage that is calculated based on the loan amount or does it get based off of your credit score?

I found a website that really confused the heck out of me and would really appreciate some clarification. It claimed that you no longer have to pay for PMI if your down payment is 20% or higher of the appraised value of the property, not the loan. So let's imagine that the house was appraised at $180,000, the loan amount was for $53,000 and the down payment was of $6,000. According to the website, I would be over the 20% based on the appraised value but not when based on the mortgage amount. Which way does it work???

[nhkev]

it is normally required when you do not put 20% down of the sales price, and some lenders also require that you have to carry it for 2 years regardless of whether the amount of equity you have in the property has increased. to get rid of it you must write a letter reuesting to have it removed then the bank has an appraisal done at your expense and then if you have the 20% equity it will be removed. I believe a lot of lenders will let you pay for it up front (say like 1% of the mortgage balance) and then you don't have to deal with it anymore. in most cases if you figured out how much your pmi payment would be and then the cost of an appraisal to remove it you may be better off paying up front. Lenders hardly ever let you know this option and you have to ask for it. Lenders that do not require pmi typically have higher rates or closing costs to offset. get specifics from the lender whether its 20% equity or 20% down compared to sales price and how long you have to carry it for. good luck on your new house.

[Mrs. P]

Remember PMI is tax deductible. Right along with your mortgage interest, however my tax girl said the PMI deduction is supposedly going to expire in 2010.

[nhkev]

Originally Posted by Mrs. P

Remember PMI is tax deductible. Right along with your mortgage interest, however my tax girl said the PMI deduction is supposedly going to expire in 2010.

thanks for that tip I didn't know that.