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PMI and me....

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colinb913
Member

PMI and me....

So, we just got our conditinal approval back, and we are proceeding, however  I am a littel stuck on understanding PMI.


The house we're buying is valued at 161,000 (appraised value), while our purchase price is only 133800. Hell of a deal, I know.

 

My LO was explaining to me today, that evne though the house appraised that high, the PMI is calculated off of the mortgage loan amount (119,800). 

 

The mortgage loan amount is 133800 minus our down payment.

 

I was always under the impression that PMI is based on the value of the home, versus the value of the loan?

 

What is stopping me from closing on my mortgage, and in two months, refinancing, wont the refi be based off a appraisail (let's just say that apprasial comes back at 161k), wouldn't I then be much closer to getting rid of my PMI? 

 

Is there a easier way around this, and I am just missing it, or is this just the way it has to be?

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Message 1 of 11
10 REPLIES 10
IamB2
Established Contributor

Re: PMI and me....


@colinb913 wrote:

So, we just got our conditinal approval back, and we are proceeding, however  I am a littel stuck on understanding PMI.


The house we're buying is valued at 161,000 (appraised value), while our purchase price is only 133800. Hell of a deal, I know.

 

My LO was explaining to me today, that evne though the house appraised that high, the PMI is calculated off of the mortgage loan amount (119,800). 

 

The mortgage loan amount is 133800 minus our down payment.

 

I was always under the impression that PMI is based on the value of the home, versus the value of the loan?

 

What is stopping me from closing on my mortgage, and in two months, refinancing, wont the refi be based off a appraisail (let's just say that apprasial comes back at 161k), wouldn't I then be much closer to getting rid of my PMI? 

 

Is there a easier way around this, and I am just missing it, or is this just the way it has to be?


PMI is calculated based on the Mortgage itself. PMI stands for Private Mortgage Insurance which covers the Mortgage (whatever the amount of the mortgage is - not the value of the home).

 

To get rid of PMI, you have to drop down the value of the Mortgage down 20% (I believe). What this means is that if the value of the home is $133800, you can only get rid of the PMI if you put down 20% as down payment, OR, you pay off 20% of your loan.

 

I am not an expert on this by any means, but I learned a little from here and from reading up on other places.

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Message 2 of 11
topa
Regular Contributor

Re: PMI and me....


@colinb913 wrote:

So, we just got our conditinal approval back, and we are proceeding, however  I am a littel stuck on understanding PMI.


The house we're buying is valued at 161,000 (appraised value), while our purchase price is only 133800. Hell of a deal, I know.

 

My LO was explaining to me today, that evne though the house appraised that high, the PMI is calculated off of the mortgage loan amount (119,800). 

 

The mortgage loan amount is 133800 minus our down payment.

 

I was always under the impression that PMI is based on the value of the home, versus the value of the loan?

 

What is stopping me from closing on my mortgage, and in two months, refinancing, wont the refi be based off a appraisail (let's just say that apprasial comes back at 161k), wouldn't I then be much closer to getting rid of my PMI? 

 

Is there a easier way around this, and I am just missing it, or is this just the way it has to be?


Think you can refinance and get rid of the PMI because of the appraised value; however,  you will get hit with a new set of closing costs which may not make it as attractive.

 

 


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Message 3 of 11
colinb913
Member

Re: PMI and me....

So if I put down let's say 15%, and then on my first mortgage payment, went ahead and cleaned out my savings account and put down 5%, would that get rid of my PMI?

 

I guess what I am asking is if my mortgage was 100k, and I put down 15k, and my first payment comes due, and I just cashed in a bunch of savings bonds, and put 5k towards my mortgage, would that get rid of my PMI?

 

Or is it 20% down, or it doesn't count at all?

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Message 4 of 11
topa
Regular Contributor

Re: PMI and me....


@colinb913 wrote:

So if I put down let's say 15%, and then on my first mortgage payment, went ahead and cleaned out my savings account and put down 5%, would that get rid of my PMI?

 

I guess what I am asking is if my mortgage was 100k, and I put down 15k, and my first payment comes due, and I just cashed in a bunch of savings bonds, and put 5k towards my mortgage, would that get rid of my PMI?

 

Or is it 20% down, or it doesn't count at all?


If you get a conventional, you could get the loan with as low as 5% down - and the PMI will disappear when you hit 20%. If you put down 20% on a conventional - there is also no PMI. If you get an FHA loan - the PMI never goes away.


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Message 5 of 11
StartingOver10
Moderator Emerita

Re: PMI and me....

Topa, you are right except that the OP has to request the MI to be removed for a conventional loan at 80% vs it being automatically removed. It isn't automatically removed until the LTV is 78% LTV.

To determine if the loan requires MI (for conventional) the lender uses the contract purchase price or the appraised value - whichever is lower.

 

 


topa wrote:


colinb913 wrote:

So if I put down let's say 15%, and then on my first mortgage payment, went ahead and cleaned out my savings account and put down 5%, would that get rid of my PMI?

 

I guess what I am asking is if my mortgage was 100k, and I put down 15k, and my first payment comes due, and I just cashed in a bunch of savings bonds, and put 5k towards my mortgage, would that get rid of my PMI?

 

Or is it 20% down, or it doesn't count at all?


If you get a conventional, you could get the loan with as low as 5% down - and the PMI will disappear when you hit 20%. If you put down 20% on a conventional - there is also no PMI. If you get an FHA loan - the PMI never goes away.


 

Message 6 of 11
colinb913
Member

Re: PMI and me....

Okay so in my case, with the purchase price of 133800, and I am putting down 14,000 which is roughly 10%.

 

Once I pay another 14,000 on my mortgage I will get out from under PMI, correct?

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Message 7 of 11
StartingOver10
Moderator Emerita

Re: PMI and me....


@colinb913 wrote:

Okay so in my case, with the purchase price of 133800, and I am putting down 14,000 which is roughly 10%.

 

Once I pay another 14,000 on my mortgage I will get out from under PMI, correct?


PMI is only used for FHA loans and you won't be able to drop it without refinancing the entire mortgage.

MI is used with conventional loans and you can drop it when you have paid down enough.

 

What type of loan are you getting - conventional or FHA?

Message 8 of 11
colinb913
Member

Re: PMI and me....

It's a conventional 30 year fixed rate.

 

So I suppose I am enrolling in MI, not PMI.

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Message 9 of 11
ShanetheMortgageMan
Super Contributor

Re: PMI and me....

PMI is for conventional... stands for private mortgage insurance.

 

FHA is self-insured, so there is no "private" company providing anything.  It's just simply called "Mortgage Insurance", or MI for short.  The full name is "Mortgage Insurance Premium" so that is why you will also see MIP in reference to FHA mortgages.

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Message 10 of 11
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