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3 Cards in this Set
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Private Mortgage Insurance
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A form of mortgage insurance required on conventional loans when loan-to-value (LTV) exceeds 80%. It is paid to the lender through the borrowers mortgage payment. These funds protect the lender against loss case of default. Borrower can request discontinuation of PMI once LTV has reached 80%. The Homeowners Protection Act (HPA) requires discontinuation of PMI once LTV has reached 78%. (As long as no payments have been missed in previous 12 months
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Mortgage Insurance Premium (PMI)
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Form of mortgage insurance required on all FHA loans. Comes in two forms, Upfront Mortgage Insurance Premium (UPMIP), a one-time fee of 1.75% of loan amount. It is paid by the borrower & can be added to the loan amount. MIP is calculated based on LTV ratio & the term of the loan. It is paid monthly as part of the mortgage payment. Both PMI & MIP are calculated based on the PMI factor.
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The PMI factor is the % charged based on the LTV, program type & loan term.
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Private Mortgage Insurance Payment portion determination
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Formula
Loan amount * PMI or MIP factor(%) =Annual PMI or MIP Annual PMI or Annual MIP/ 12 =monthly PMI or MIP |
On FHA loans with terms of 15 years or less MIP is to be removed as soon as LTV reaches 78% regardless of timeframe.
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