Home purchase - PMI

[newstart18]

Congrats to all on here who either just bought, or will soon be buying, a home. It's an exciting event, to be sure! Food for thought, for everyone....if you bought your home without 20% down, you are almost surely paying PMI (private mortgage insurance). PMI is usually between 5% and (closer to) 10% of your monthly payment...a lot of money! Although federal law mandates lenders to drop PMI once equity reaches 20%, this only applies to conventional loans, not FHA or VA. Moreover, the 20% equity must be over the appraised value AT THE TIME OF PURCHASE, so the natural equity that builds year to year is not taken into account. In other words, if you don't do something about it yourself, you'll be paying PMI forever. Homes increase in value, PERIOD (unless you bought in a slum). Keep an eye on comps in your area. I built my first home in '96 with less than 10% down payment. Because appraised value in new construction can increase quickly, I was able to re-appraise less than 2 years after building and request (demand!) that the PMI be dropped because I had reached 20% in equity. For me, that was over $100 per month off of my payment. A legit appraisal and no late payments is all it takes.

[firstsource]

Great advice.

One other comment is that some lenders will accept a "market analysis" from a realtor that says that your home loan is under 80% of the current value, check with the lender. If the lender insists on an appraisal, ask if a "2055 (pronounced Twenty Fifty Five) exterior will work. Most times it will. That is the cheapest appraisal, and fastest to get done.

Charles