Private Mortgage Insurance
If you have less than a 20% down payment when you purchase a home, you most likely will be required to purchase private mortgage insurance or PMI. PMI protects the lender on a conventional mortgage in the event the borrower defaults and the lender forecloses on the property. The premium for PMI is paid by the borrower and may be canceled once certain conditions are met. There are other variations of this type of insurance that may not be canceled if the mortgage is backed by the Federal Housing Administration (FHA) or the Department of Veterans Administration (VA).
Your lender is required to notify you on an annual basis that it is possible to cancel PMI. This notification is often included with the information regarding the amount of interest you paid on the mortgage and the disbursements from your escrow account. There should be an address and telephone number to contact the lender along with the toll free number 1.800.252.3439 for the Texas Department of Insurance (TDI). The lender is your best source for details regarding what is necessary to cancel PMI. TDI does not maintain mortgage information.
The cost of PMI can be anywhere from ½ of 1% to almost 6% of the principal amount of the loan depending upon the down payment, the type of loan (fixed or adjustable interest rate), and term of the loan, as well as borrower’s credit score(s).
Source: Texas Department of Insurance