How Do You Get Rid of PMI on FHA Loans?
Most homeowners who took out a mortgage had to purchase private mortgage insurance. That’s a requirement from most lenders, even for FHA loans. It’s not required when you pay more than 20% of the cost of the house in your down payment, but that doesn’t happen very often. This insurance can be incredibly expensive, and it may benefit you to get rid of it, but it’s not a simple as you might like. There are some conditions you will have to meet first before you can drop the PMI.
Common Method for Dropping PMI
PMI will actually be removed once you pay 82 percent of the house’s cost. The mortgage servicer is required by law to remove it at that point, but you can request for its removal earlier.
When you are looking to do this for FHA home loans in Dallas with Mid America Mortgage, Inc., many mortgage servicers will remove it if you request they do so once you pay off 20% of the home’s value. At that point, you will have 20% equity in the home, and it should not be a problem to get rid of the PMI then.
Other Means of Dropping PMI
Perhaps you don’t want to wait that long to be rid of the private mortgage insurance. It’s expensive, after all, and it can be a hassle to pay. If you really want to be done with it before you reach 20% equity, then there are a few options open to you.
The simplest way is to have the house reappraised. If you believe that a new appraisal will lower the original appraised value of the home, then you can pay a few hundred dollars for the home to be appraised once more. The new appraisal could find that the home is worth less than originally thought. You’ll still have to meet that 20% equity before the PMI can be removed, so you’ll have to hope that the new appraisal is enough.
You can also have the loan-to-value ratio recalculated. This can put you in a position where the PMI could be removed by the mortgage servicer, but only if you add some value to the home. There’s plenty of ways to do that- adding an addition, remodeling an important room or making changes to the house.
For some people, the best way to get rid of PMI sooner than planned is to just pay more money into the mortgage. That PMI will drop off once you hit 82% equity with no further effort from you than that you just keep paying. You can make that happen much sooner by paying more on the house each month in your annual premiums. This will cut the amount of interest you have to pay over time and get rid of the PMI sooner. It’s a good way to save you money in the long run, but you have to have the funds available in the first place to pull this off.
PMI Cancellation Requirements
There are certain protocols you must follow if you want your PMI cancelled. If you don’t follow these exactly, then you risk having to pay more on the PMI before it finally goes way.
First of all, you have to request in writing that the insurance be dropped. Email or phone calls simply won’t work in this case, so make sure you are following the proper steps to have the PMI eliminated.
You’ll also have to have a good payment history. If you missed payments, it could count against you.
In addition, you may need to have the house reappraised. Not all mortgage agreements will require this step, but many of them will, so make sure you are prepared for it.
Finally, you cannot have any home equity loans or home equity lines of credit in addition to the PMI.
Once you meet all these requirements, getting rid of the PMI will be much easier.