Mortgage Insurance | TN Residents | Mortgage Investors Group

When is Mortgage Insurance Required?

If you are getting a conventional loan with a loan-to-value (LTV) ratio of more than 80 percent (you put down less than 20 percent), you will need private mortgage insurance (PMI). You can also be required to carry PMI if you have a low credit score or are otherwise seen as high risk, regardless of your LTV.

All FHA loans must now carry mortgage insurance, regardless of the down payment. Qualified veterans who get a VA loan never pay PMI.

Getting Rid of Mortgage Insurance

Several years ago, FHA mortgage insurance premiums would drop off the loan after five years of obtaining a certain LTV. Now, mortgage insurance will remain for the life of the loan and can only be removed by refinancing into a conventional loan.  You would need to prove by an appraisal that your equity exceeds the 20 percent needed.

PMI is much easier to get rid of, as it can drop off once you have at least 20 percent equity in your home. You can reach this through home appreciation or paying down your loan. We will require proof in the form of an appraisal, which may cost $350 to $500. We must cancel your PMI if your balance hits 78 percent LTV.

Think of mortgage insurance as a necessary cost to getting a loan if you cannot put down a significant down payment. Still, make sure you know whether it is possible to cancel your mortgage insurance and how to do so.