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Q: My wife and I would like to request your assistance in researching/understanding our current $905.34 monthly private mortgage insurance (PMI) payment. My wife and I were surprised to find out that we had to pay $905.34 a month for PMI. We were informed at closing that we had to pay $905.34 for PMI, but we thought it was based on an entire year’s worth of payments. As you can see, we were wrong.

We tried to ascertain the nature of the high PMI cost, but were sent the standard form letter. Our lender stated that our PMI was calculated based on our loan to value (98 percent) and our FICO score. We were further informed that the PMI was a requirement to fund the loan. We have a conventional loan at 7.34 percent. Although our credit is not great we feel that we were misled on the PMI issue. Please help.

My loan information is as follows:

Principal and Interest: $1,791.61
PMI: $905.74
Taxes: $247
Hazard Insurance: $34.82
Total Monthly Payment: $2,979.17

Loan Type and Term: 30 Years Conv w/PMI
Original Principal Balance: $259,400.00
Contractual Remaining Term: 29 years, 10 months
Interest Rate: 7.375%
Current Principal Balance: $259,004.03
Escrow Balance: $2,673.88

W. Whitfield

A: In all my years of real estate coverage, I’ve never heard of such a high amount for PMI. I’ve also never heard of basing the PMI on your credit score. First of all, forget emailing and writing letters until after you have talked with a manager level or higher at the lender. Go to their web site to locate a number to call where you can talk to a live person.

Since you’ve already received the form letter explaining their policy, now you want someone to actually tell you on the phone with their name, position and contact information connected to it, that your PMI is indeed $905.74 per month.

I know I’m going to get plenty of emails from loan officers, processors etc., on this one – bring it on. Please…enlighten me.

I would also suggest that you take a half-day to take care of this because with the figures you have above, either this is a newly instated policy to have you pay more than $10,000 per year for PMI or a major SNAFU on the paperwork side. I would look over your Truth In Lending disclosure to see what you were informed would be your estimated principal/interest/taxes/insurance (PITI) and use that as a tool in your phone calls.

The Truth In Lending statement is required by the mortgage regulators to prevent what just happened to you. The estimated payment is provided so that you can see what you’ll actually qualify for and give you a heads up on your monthly outgo for the loan.

Most times PMI is roughly $40 - $50 per month for every $100,000 borrowed. It is an insurance policy to protect the lender in case you default on the loan. Prior to 1998, once you had PMI, unless you refinanced out of the original loan to a mortgage that was 80 percent loan to value or less, you had PMI for the life of the loan. Congress passed the Homebuyers Protection Act in 1998, requiring lenders to notify homeowners that their equity had reached a high enough level to where PMI was no longer needed.

The terms on your loan point to a borrower who does have credit issues. But also, your interest rate would be pumped up because of the high loan to value amount (98 percent) that you‘ve taken. The average interest rate at this writing is below 6 percent. To save thousands of dollars, you must resolve that you are going to conduct due diligence to get to the bottom of this. Best of luck.

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