Mortgage/PMI Question

kc0721

DH and I bought our house in June 2007.  We got the house for about $20,000 less than what the house appraised for.  We put a small down payment down and got a mortgage. My question is, I understand PMI and why we/people have to pay it.  What I don't understand is this, if we purchased a house for less than what it was worth at that time and put a down payment down, why are we still paying PMI????  I know if we had put 20% down (which we didn't) we could've avoided paying this.  YET, if the house already is worth that much more before we even bought it doesn't that count as equity and wouldn't that go along with not paying PMI.  I've been reading stories online that say if you have 20% to put down or such n such amount of equity in your home, you won't have to pay PMI.  So that amount of "worth" in the house and the money we put down should've excluded us in paying PMI. 

I think I've thought about this so long I've confused myself and I'm sure if you've read this far, you're probably confused too. 

My main point is, I want to have the PMI taken off our mortgage.  I'm just wondering if we still need to be paying PMI considering we got that much off the house and put some money down??? 

karyn83

The situation sucks, but it's really just a way for the lenders to get as much money from you as possible in case you stop making payments, I think..that's my understanding, anyway

kc0721

karyn83:

The situation sucks, but it's really just a way for the lenders to get as much money from you as possible in case you stop making payments, I think..that's my understanding, anyway

Yes, it does suck and that's exactly why the mortgage companies do it.  BUT, if you stop paying for your mortgage, they'll foreclose and take your house too, I mean isn't that enough, why must they charge me a set amount each month, just for there benefit. 

crollin

When you purchase a home you have to go by the sales price and for a refianace you go by the appraised value.  After you have owned the house for 12 months, you can contact your lender and ask them if you provide them with a current appraisal and the loan balance is 80% or less than the new appraised value can you get the MI droped.  Most lenders will drop it.  Regions Bank requires it to be 75% or less to drop the MI.  You have been in the house for more than 12 months so you should be fine.  You will need to get a current appraisal.  That should cost you around $300-$400.  I was a mortgage specialist for 7 years and this is what I advised all my customers to do.  I hope this helps.   

 

aubie96

crollin:

When you purchase a home you have to go by the sales price and for a refianace you go by the appraised value.  After you have owned the house for 12 months, you can contact your lender and ask them if you provide them with a current appraisal and the loan balance is 80% or less than the new appraised value can you get the MI droped.  Most lenders will drop it.  Regions Bank requires it to be 75% or less to drop the MI.  You have been in the house for more than 12 months so you should be fine.  You will need to get a current appraisal.  That should cost you around $300-$400.  I was a mortgage specialist for 7 years and this is what I advised all my customers to do.  I hope this helps.   

 

She is totally right.  It definitely helps for you to avoid it if you put 20% down at the time of purchase (along with your equity in the home) but not everyone can do that.

Here is some additional information. 
http://www.frbsf.org/publications/consumer/privatemortgage.pdf
and you should be able to look at any fed reserve bank website (I just happen to find the SF one)
I would look into it further if you think your house would still appraise for more than what you paid/loan amount.

GL!!!

Iove.wins

I don't know the answer to your question about pmi, but I do know that now is a good time to refi if that's what you guys are wanting to do. Jason and I locked in a 4.875% interest rate.

PinkLadyRN1

I think the pp's pretty much covered it!  PMI is based on the purchase price of your home.  If you don't have 20% of that to put down....you have to pay the private mortgage insurance.  It is just insurance that the lenders take out on you...to cover them in case you can't pay!  I was really upset about the whole PMI thing...until I really took a look at how much I was paying.  It is only a little over $60 a month!  That really does not make a difference in my monthly payment....so I just try not to sweat it!