Profile picture for artsyred52

Can PMI can be dropped on a conventional loan with an 80% LTV. Is this true with a FHA loan also?

My LTV is 85% now. I was hoping to get out of my FHA loan in order to avoid PMI. However, now I have been told that conventional loans have PMI until the LTV reaches 80%. Is this true?
  • August 21 2009 - Northwest
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Answers (9)

Profile picture for SunTrust
Private mortgage insurance insures up to 20% of the loan amount when a buyer puts down less than 20%.

PMI insures more than that. Depending on the coverage level required either by the agency guideline or the lender the coverage can be as much as the top 35% of the mortgage.
  • August 21 2009
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Yes. Conventional loans require a 20% down payment. Private mortgage insurance insures up to 20% of the loan amount when a buyer puts down less than 20%.
  • August 21 2009
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That is correct, on FHA you have to pay a minimum of 5 years, even if you prepay it to 78%, and good advice to ask your lender.
  • August 21 2009
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Profile picture for BigMoose81
if I recall correctly, not only do you have to pay 22% of the purchase price of the home but you also have to wait a certain amount of time specifically for an FHA (I think its 2 or 5 years).

If I were you, to be safe speak with your lender and have them let you know.
  • August 21 2009
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senmmail, you will have to get a new appraisal after 1 year, values can change in 1 week these days. Your plan though involves paying the loan down on a conventional and when I have looked, the notes I have read state MI has to be paid for a minimum of 18 months, but some may be 12 months too. The other benchmark I have read always has 78% LTV as the drop point so if you have it for 18 months and prepay another 10%, you can probably get rid of MI IF your property / comps do not drop in value.
  • August 21 2009
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Sen, your appraisal will not be good for that long.  You will need to have a new appraisal if you plan to get it removed that way. 

You can put additional monies down, however, you will need to provide proof of this down payment to the lender.  If there are any large deposits in your accounts other than payroll deposits, they will most likely need proof of where these deposits came from.
  • August 21 2009
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Profile picture for senmmail
Clay,
I am buying with 10% down and planning to pay the rest 10% in a year to eliminate PMI. How long is the appraisal valid?

I submitted my loan application with 10% down. I will have 5% as reserve by the time of closing. Is it allowed to put more down than mentioned on the loan application?
  • August 21 2009
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I am going to correct the idiot that posted 1st, me. You need to pay down to 78% on FHA to eliminate MMI, calculate 78% of the sales price and that is the principal balance you need to reach.   
  • August 21 2009
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Your FHA loan will have to reach 80% by you paying the loan down, not getting a new appraisal. Assuming the appraisal was the same value as the purchase price, deduct 20% from the price you paid for your home and that is what your principal balance needs to be to eliminate MI. Conventional loans are different because if you have experienced appreciation, you can get a new appraisal showing 80% or less LTV and have MI removed. That also depends on the terms of the note as many have a 78% LTV benchmark, and lenders, today, will probably fight the new value with their own AVM's.  
  • August 21 2009
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