Question:

What home mortgage loan insurance depends on?

Answer:

Your home mortgage loan insurance will depend on several factors. Firstly and most important comes the down payment - if you are putting down less than 20% of your loan you will have to either buy mortgage loan insurance or find a way around it and the home mortgage loan insurance premium depends on how much down payment exactly you are putting into the loan.

One way to go around a PMI (private mortgage insurance) is to replace it with a second mortgage to cover the difference between the loan from the first lender plus your down payment up to the actual value of the property. This is called piggybacking and comes with a second mortgage or a HELOC - whichever has better rates and closing costs. However, in the past HELOCs and second mortgages had conspicuously lower rates than home mortgage loan insurance and the deal was obvious. Unlike now, when HELOCs, second mortgages and a PMI will not get you the obvious benefit and you have to actually involve a lot of math to find which one will bring slightly lower payment.

Cancel PMI - is it possible?

The good news is home mortgage loan insurance is subject to automatic cancellation by the lender as per HPA (Homeowners Protection Act) as long as:

  • the loan was signed after July 28, 1999;
  • you are current on payment;
  • there are no other liens on the property;
  • you have reached 22 for standard and 23 percent equity in the home for riskier loans.

Another factor to influence the home loan insurance premium is your credit score. However, it is a recent change for FHA insurance, and by the time of this article it is not clear if it has been effectively enacted. Private insurers will take credit score in consideration, though.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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