Downpayment & PMI Question

Re: Downpayment & PMI Question

• MrsPM

  January 2013

  I can try and answer some of your questions. 

  Jdunk2008:

  I'm new to all of this but just curious how the PMI stuff works?

  I really would prefer to have a downpayment (20%) for a house. I would just like to have a better understanding.

  Can someone give me an example of say a $200,000 house that instead of the 20% ($40,000) downpayment I could only come up with $30,000? How do they decide what you pay per month for the insurance.  The lender decides what they are comfortable with for the insurance. It isn't something that you determine. It protects the lender if you default on the loan. 

  Also-do you typically end up paying MORE if you down have the 20% or do you just pay the extra amount until you have totaled the 20% downpayment.  PMI is on top of your monthly payment.  You will definitely paying more if you're paying PMI.

  I hope that all makes sense!

  Thanks!

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• Trixeetrix member

  

  January 2013

  You only have to pay PMI until the amount you have financed is less than 80% of the value of your home.  However, if values of homes rise you would have to pay for a bank appraisal for them to determine you have paid off more than 20% of the value of your home.

  

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• LarissaB

  January 2013

  Also with some loans with less than a 20% down payment, while you can get PMI taken off after your loan is less than 80% (or in some cases 78%) of the value of the home, they may also have a minimum amount of time you have to keep PMI.  In our case, I believe we have PMI a minimum of two years.  So even if we started to really pay down our principal and got it below the 80% in say 18 months, we'd still be paying PMI until after the 2 years was up.  I believe for FHA it's a minimum of 5 or 7 years . . . 

  

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• chrisnjay05212010 member

  

  January 2013

  LarissaB:

  Also with some loans with less than a 20% down payment, while you can get PMI taken off after your loan is less than 80% (or in some cases 78%) of the value of the home, they may also have a minimum amount of time you have to keep PMI.  In our case, I believe we have PMI a minimum of two years.  So even if we started to really pay down our principal and got it below the 80% in say 18 months, we'd still be paying PMI until after the 2 years was up.  I believe for FHA it's a minimum of 5 or 7 years . . . 

   we have an FHA and I'm almost positive our PMI is 80% and 5 years. Just so you have an idea OP, the PMI in our mortgage payment is about $98/month. We have had our home for 3 years so far, and every year the PMI portion goes down a bit. 
  

  
  

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• Alja513

  January 2013

  We actually are in the process of buying a house and we have the option of paying off our PMI up front, which ends up being a lot cheaper in the long run. So our house is $280,000 and it will be about $5,000 for us to pay off our PMI. Our PMI would have been about $250 per month, so paying it off up front helps a ton in our monthly mortgage fee, to the point that we are able to afford a more expensive house because of it. You may want to look into this option!

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• Jdunk2008 member

  January 2013

  A lot to think about. Thanks everyone!

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• jtmh2012 mod

  

  January 2013

  I had PMI with my first loan.  It was an FHA loan.  I refinanced it about three years into the loan and got all of it back.  The loan officer said because the value of the house had gone up that I now had enough equity to be considered 20% vested in the new loan and since I hit that before 7 yrs I was eligible to get it back.
  

  
  

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• mckenzie915 member

  

  January 2013

  We were told our PMI would be a mandatory 2 years (if we paid down the loan during that time), but it does depend on the loan. I asked our loan consultant how long would it take to pay down 20% of the loan if we put 5% down for a 30 year loan and didn't pay down the loan quicker. It was like 14 years, because you pay so much interest the first few years. That was a real eye opener. Now we are focusing on getting 20% down. 

  
  
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