Key West Real Estate Down Payment

What do you need for a down payment in Key West?

Some people may qualify for special government-insured loans offered through the Federal Housing Administration (FHA) or Veterans' Administration (VA). The down payment needed for these loans is minimal. You can learn more about the programs at http://www.hud.gov/hudqa.html  and http://www.homeloans.va.gov . But, unless you can qualify, you will need a down payment equal to 20 percent of the purchase price to avoid paying the extra cost of Private Mortgage Insurance (PMI). With less than a 20-percent down payment, banking regulations require the buyer to carry PMI. This insures the lender against nonpayment of the difference between the customary down payment and the down payment actually paid. The charge for PMI may be as much as $50 or $60 per month, although the amount declines as the loan ages and you begin to pay off more of the principal.

How long do I have to pay PMI (Private Mortgage Insurance) in Key West

The federal Homeowner Protection Act, which went into effect in the summer of 1999, helps consumers understand when they no longer need to pay private mortgage insurance—and thus save thousands of dollars over the length of a real estate loan in Key West.

Once you’ve build up at last 20% equity in the Key West real estate—meaning that the money owed is less than 80% of the home’s value—the lender is no longer at risk, and you can ask that the insurance be cancelled.

Under the new federal law, the lender must cancel the insurance when the mortgage balance falls below 78% of the home’s original purchase price. However, because homes usually appreciate in value, you may be able to cancel it earlier—and federal law now requires the lender to tell you annually that you have the right to cancel if you meet certain criteria, such as rising home values increasing your equity.

Sometimes canceling PMI occurs as part of refinancing your loan, when it’s clear that your home has increased in value to the point where the balance of your loan is less than 80 percent of the home's value. Be aware, however, that even outside of a refinancing situation the insurer will need written support from a certified appraiser as to the value of your home. The value assessed by a municipality for real estate tax purposes is seldom considered in evaluating home equity.