Let Dentex Professional Appraisals LLC help you figure out if you can eliminate your PMIA 20% down payment is typically the standard when purchasing a home. The lender's risk is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value variations on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became widespread to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender in case a borrower defaults on the loan and the value of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they secure the money, and they are covered if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the damages.
How can home buyers keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take several years to get to the point where the principal is only 80% of the original amount borrowed, so it's necessary to know how your Texas home has appreciated in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not adhere to national trends and/or your home might have gained equity before the economy declined. So even when nationwide trends signify falling home values, you should realize that real estate is local.
The difficult thing for most homeowners to determine is whether their home equity has exceeded the 20% point. A certified, Texas licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Dentex Professional Appraisals LLC, we know when property values have risen or declined. We're masters at identifying value trends in Corinth, Denton County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
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