Mortgage Insurance

For homeowners who are paying Private Mortgage Insurance (PMI), removing it can lead to significant monthly savings. PMI is typically required when a borrower puts down less than 20% on a home, but it doesn’t have to be a permanent expense. North Star Mortgage Network is here to guide you through the PMI removal process and help you understand the key requirements.

What is Private Mortgage Insurance (PMI)?

Private Mortgage Insurance (PMI) is an additional cost that protects lenders in case a borrower defaults on their mortgage. While it benefits lenders, homeowners often seek to remove it as soon as they meet the eligibility requirements.

Private Mortgage Insurance (PMI) Removal Eligibility Requirements

PMI can be removed under specific conditions depending on the age of the loan and the loan-to-value (LTV) ratio. Below are the criteria for PMI removal on single-family residences:

1. Loans Less Than Two Years Old:

PMI may be removed only if the homeowner has made significant structural improvements to the property.
A GSE-ordered valuation is required, and the homeowner must cover the cost.
Large lump sum payments made in the first two years will not automatically remove PMI.

2. Loans Between Two and Five Years Old:

The LTV ratio must be 75% or lower.
The borrower must pay for a GSE-ordered valuation to confirm the property’s current value.

3. Loans Older Than Five Years:

The LTV ratio must be 80% or lower.
A GSE-ordered valuation is required and must be covered by the borrower.

Valuation Requirements for Private Mortgage Insurance (PMI) Removal

A home valuation is required to determine if your loan meets the LTV threshold for PMI removal. The original appraisal from the time of purchase cannot be used. Instead, an evaluation must be conducted using Fannie Mae and Freddie Mac’s online valuation tools. The cost for this valuation typically ranges from $150 to $200, which must be paid by the homeowner.

It is important to note that North Star Mortgage Network cannot override investor determinations regarding property valuation or eligibility for PMI removal.

Payment History Requirements for PMI Removal

In addition to meeting LTV and seasoning requirements, homeowners must also demonstrate a strong payment history:

No 30-day late payments in the last 12 months.
No 60-day late payments in the last 24 months.
The mortgage must be current at the time of the PMI removal request.

Occupancy Requirements for Private Mortgage Insurance (PMI) Removal

To qualify for PMI removal, the occupancy status of the property must remain unchanged from when the loan was originated. This means that if the home was initially a primary residence, it cannot have been converted into an investment property.

How Long Does the PMI Removal Process Take?

PMI removal requests can take up to 30 days to complete. Once the request is approved:

The monthly payment will be updated.
New billing statements will reflect the lower payment amount.

Take the Next Step with North Star Mortgage Network

If you’re eligible to remove PMI, North Star Mortgage Network is here to assist you through the process. Lowering your monthly mortgage payment can free up funds for other financial goals, and our team is ready to guide you every step of the way.