Costly fees

In the past eight years, many buyers in Santa Clara and surrounding counties purchased their homes with loans that required mortgage insurance. Mortgage insurance (MI) is usually required when you buy a home with less than 20 percent down, or when you buy a home with a government backed program like an FHA loan or a USDA loan.
In the past decade the rules of MI removal have changed many times, so the removal of MI depends on the age of your mortgage.
FHA loan: depending on when you closed on your FHA loan, the only way to remove the MI is through a refinance into a new loan, either after you have 20 percent equity built in the home or when you can use other mortgage instruments like a first and second mortgage bridge the equity gap.
Conventional loan: this is the loan that has the easiest path to MI removal. Refinance is always an option, however if you have built your equity position to 20 percent, you can petition the removal of MI by your lender. They may require an independent appraisal or other documentation to comply with the removal. Check the disclosures on MI in your original loan package for details.
Other loans like USDA do not allow for MI removal so a refinance would be the only way to remove the monthly MI liability.
Jayson Stebbins is a 23-year veteran of the mortgage banking industry. Contact Jayson at (408) 825-0220 or at

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