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What is PMI?
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What is PMI??

Basically If your down payment on a home is less than 20 percent of the appraised value or sale price, you must obtain private mortgage insurance, known as PMI, with your lender. This will enable you to obtain a mortgage with a lower down payment because your lender is now protected against any default on the loan.

PMI charges vary depending on the size of the down payment and the loan.

Most home buyers need PMI because 20 percent of the sale price on a home is a lot of money; for instance, that's $20,000 on a $100,000 home. Home buyers must maintain the PMI premiums until they cross that one-fifth-of-principal threshold, a process that can take years in longer-term mortgages.

Keep track of your payments on the principal of the mortgage. When you reach the point where the loan-to-value ratio hits 80 percent, notify the lender that it is time to discontinue the PMI premiums. The Homeowners Protection Act of 1998, which took effect in 1999, requires lenders to tell the buyer at closing how many years and months it will take for them to reach that 80 percent level and cancel PMI. Lenders must automatically cancel PMI when the balance hits 78 percent.

The law does allow lenders to continue requiring PMI all the way down to 50 percent equity for so-called high-risk borrowers.  Loans for people with spotty credit histories and higher debt-to-income ratios also fall into this category. Additionally, some FHA loans require payment of PMI throughout the entire life of the loan.

There are some mortgages that do not require PMI, speak with your lender about it!

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"When You're # 1, You Can Do Things Others Can't" - Source:  2006 Ad Tracking Study.  This survey included 1202 telephone interviews (via computer assisted program) with a national random sample of adults (ages 25-54) who have either bought or sold a home within the past two years or plan to purchase or sell a home within the next two years.  Brand awareness questions are based on a sample size of 1202 respondents with a margin of error of +/- 2.4% at 90% confidence level.  The study was conducted between March 6th-October 2nd, 206 by Millward Brown, a leading research organization.