What Is PMI?
Private Mortgage Insurance Answers with 2013 Update

Have you been asking yourself, What is PMI? Also known as private mortgage insurance, it could be your solution to home buying with a small down payment.

For years banks required a 20% down payment from home buyers. However when a buoyant economy caused home prices to rise, saving a sufficient down payment became harder... and harder.

So private mortgage insurance allowed thousands of home buyers to purchase the house of their dreams with minimal down payments. It also made refinancing easier for homeowners with less equity.

Deductible Mortgage Insurance Premiums - National Mortgage News

Update: On January 2, 2013, President Obama signed the Bush American Taxpayer Relief Act of 2012 into law.

Deductible Mortgage Insurance Premiums: American Taxpayer Relief Act of 2012 becomes law in 2013

This means many homeowners who are paying mortgage insurance can continue to deduct it, just as they deduct mortgage interest on their home loans.

The 2013 law applies to personal residences and second (or vacation) homes financed with conventional and many government-backed mortgages.

As with all tax matters, check with your accountant to see if you can benefit from the American Taxpayer Relief Act of 2012 and deductible mortgage insurance premiums.

How Does Private Mortgage Insurance Work?

Here is an example of PMI making homeownership possible. 20% of a $300,000 house equals a $60,000 down payment. No surprise, this can be a struggle especially for first time home buyers.

Just the opposite, real estate values drop from time to time and homes lose value. Overnight, homeowners can end up with insufficient equity to refinance. But with the backing of mortgage insurance, lenders can approve refinancing with less than 20% equity.

In short, mortgage insurance can help home buying and refinancing.

Who Does Private Mortgage Insurance Insure?

PMI insures mortgage lenders against losses incurred when borrowers are unable to make their monthly house payments. PMI does not insure homeowners.

What Will PMI NOT Insure?

As previously stated, PMI insures mortgage lenders. It is not life insurance and does not cover monthly house payments in the event of job loss or death.

Why Does My Home Mortgage Require PMI?

PMI helps homeowners with less than 20% equity. It assists refinances after the loss of equity. Mortgage insurance also befriends home buyers with less than 20% for a down payment.

When Is My Private Mortgage Insurance Due?

Generally, PMI is included in monthly house payments. Ask your lender about alternative upfront lump sum payments or lender-paid insurance, sometimes called lender self-insuring.

Who Is Responsible for Mortgage Insurance Set Up?

During the home mortgage process, the lender applies for the PMI approval on behalf of the borrower.

How Is PMI Approval Determined?

In part, PMI approval and cost is based on equity or down payment, credit history, occupancy status, loan type and size of the home mortgage.

Is PMI the Same as FHA Mortgage Insurance?

PMI comes from private companies. It is purchased by lenders and charged to borrowers. It insures conventional loans.

In the case of FHA, borrowers usually pay a monthly fee and finance a lump sum, depending on the FHA program. Both amounts go into a federal account to insure lenders against borrower's default on FHA mortgage loans.

How Is the Cost of PMI Calculated?

Is it a one-size-fits-all amount or does the cost vary? You can find the answer at How Lenders Calculate PMI.

What Is the PMI Cancellation Policy?

Traditionally, home buyers have been opposed to PMI since it was tedious to cancel. In 1998, federal laws changed helping qualified homeowners get rid of the costly mortgage insurance under the guidance of The Homeowner's Protection Act.

Discover how lenders calculate PMI removal and when you could need a current appraisal at How Do I Cancel PMI?

Ask Kate: What is PMI?

Ask Kate at Get-Your-Best-Mortgage-Rate.com

What if you could ask a mortgage insider anything you wanted regarding PMI underwriting approvals? Now you can.

Ask Kate is specifically designed to answer your questions and create dialog regarding mortgage solutions.

Where Do You Want to Go Next?

A Reader asks Kate, Who determines the cost of mortgage insurance.

Lender Paid Mortgage Insurance Halts HARP Refinance - Although she has paid her mortgage insurance, Amy's lender never sent them to the MI company. So Fannie Mae won't approve her HARP refi. Chris in Washington and Lloyd in Texas question why their lenders refuse to remove PMI.

Get more of Ask Kate's answers at Paying Private Mortgage Insurance.

You might not know this but you could be entitled to a mortgage insurance refund from FHA.

For home buying help, visit Discover The Magic Of Buying A House.

Refinancing help is found at Refinancing Advice - Nuts And Bolts.

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The information you obtain at this site is not, nor is it intended to be, a substitute for personalized professional advice. All numbers are estimated and are for illustrative purposes. Rates, loan programs, and guidelines are published for convenience only, vary with no advance warning, are not guaranteed, and should not be relied upon. You are encouraged to consult a lender for a current rate quote and seek advice from qualified professionals, for example, attorneys, accountants, financial planners, housing counselors, mortgage lenders, and/or real estate agents, regarding your individual situation. Comments and opinions found here are not necessarily those of Get-Your-Best-Mortgage-Rate.com and its owners.

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Finally! PMI Answers You Need

What Is PMI - Could private mortgage insurance be your solution to equity and down payment problems? 2013 Update: Deductible mortgage insurance premiums.

Updates on HARP 2.0 Refinance with Borrower and Lender Paid Mortgage Insurance - PMI and LPMI.

Could you be entitled to a mortgage insurance refund from FHA?

How do lenders calculate PMI? Credit history, amount of down payment or equity, occupancy status, and loan type factors.

How Do I Cancel PMI Will refinancing or a new appraisal be required?

What to do if PMI Decision Making is getting in the way of refinancing or buying a house.

My name is Kate and I will be your guide - PMI Questions and Answers