If you have purchased a house through obtaining a mortgage loan that exceeds 80% of the price of your house, then your lender would ask you to buy an additional insurance. This insurance is known as Private Mortgage Insurance. In simple terms, if you are a home buyer making a down payment below 20%, it becomes essential for you to buy PMI.
Advantages of PMI
Private Mortgage Insurance offers a number of advantages and they include the following:
1) PMI offers protection to a lender in the event of a loss resulting from a default in loan repayments by a debtor
2) It allows a potential home buyer to enjoy higher accessibility to home ownership if he does not have adequate cash for down payment
3) It helps a potential home buyer to buy a home with down payment as low as 3%-5%
4) You need not wait until you accumulate sufficient money for the purpose of purchasing a house.
New Prerequisites for PMI
According to the new federal regulation, The Homeowners Protection Act of 1998, lenders are required to provide particular disclosures about Private Mortgage Insurance for loans. The lenders have to make these disclosures in relation to PMI for loans obtained by the principal residences of the borrowers prior to, on or later than 29th July, 1999. There are also clauses for involuntary cancellation of PMI and termination of PMI asked for by the borrower.
What is covered Under the Homeowners Protection Act?
Usually, The Homeowners Protection Act of 1998 is pertinent for mortgage deals of home buyers buying houses later than 29th July, 1999. Nevertheless, it is also applicable for the loans taken earlier than 29th July, 1999. This act does not apply for VA and FHA loans. Furthermore, the new law has separate prerequisites for loans categorized as "high-risk" loans.
Advantages of PMI
Private Mortgage Insurance offers a number of advantages and they include the following:
1) PMI offers protection to a lender in the event of a loss resulting from a default in loan repayments by a debtor
2) It allows a potential home buyer to enjoy higher accessibility to home ownership if he does not have adequate cash for down payment
3) It helps a potential home buyer to buy a home with down payment as low as 3%-5%
4) You need not wait until you accumulate sufficient money for the purpose of purchasing a house.
New Prerequisites for PMI
According to the new federal regulation, The Homeowners Protection Act of 1998, lenders are required to provide particular disclosures about Private Mortgage Insurance for loans. The lenders have to make these disclosures in relation to PMI for loans obtained by the principal residences of the borrowers prior to, on or later than 29th July, 1999. There are also clauses for involuntary cancellation of PMI and termination of PMI asked for by the borrower.
What is covered Under the Homeowners Protection Act?
Usually, The Homeowners Protection Act of 1998 is pertinent for mortgage deals of home buyers buying houses later than 29th July, 1999. Nevertheless, it is also applicable for the loans taken earlier than 29th July, 1999. This act does not apply for VA and FHA loans. Furthermore, the new law has separate prerequisites for loans categorized as "high-risk" loans.
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