Homebuyers that can't afford to put 20% down on the purchase price of their new home often opt to take out private mortgage insurance (PMI) with their lender to help seal the deal. This insurance protects the lender from a default, and can add more than $100 to a monthly mortgage payment.
Firefighters with a high interest rate on their mortgage and PMI might qualify for a mortgage refinance that could not only reduce their interest rate, but also eliminate PMI.
The PMI rules under any new loan terms are still the same: pay 20% or the home has to appraise higher than the original loan. Homeowners usually have to pay for the appraisal, but if the home value increases, it could be a win-win situation.
Firefighters with FHA-insured loans can refinance and obtain the lower annual Mortgage Insurance Premium. For most FHA loans this will reduce the annual premium from 1.35 percent of the loan balance to .85 percent. HUD explained that they expect 100,000 to 200,000 FHA-insured borrowers to refinance in the next year.
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