Many people want to know what the best way to “get rid” of mortgage insurance — either Private Mortgage Insurance (often referred to as PMI) or FHA Mortgage Insurance (acts just like PMI, but payments are made to HUD, not a private mortgage insurance company).

If you want to avoid PMI altogether, you must put 20% down when you purchase the property. In the recent past, many times people would get a 2nd mortgage for that 20%, but many lenders have done away with “piggyback” loans — so more people are now buying homes and paying the PMI because they were not putting 20% down.

If you only put 5% down and are now wondering “at what point am I able to get rid of PMI” the answer is that when you reach a point where you think you have 20% equity in your property, you should contact your mortgage servicer. They will be able to tell you what their requirements are for “getting rid of PMI” and will usually send you a package of instructions that involve getting an appraisal and completing some forms.

Because the process is different between lenders, you need to speak with your current mortgage servicer to be sure. There is also a chance that they will drop the PMI automatically, but I rarely see that happen.

When dropping PMI, the factors that your lender will consider are the current value of your home and if you’ve made your mortgage payments on time. Be sure not to spend the money on ordering an appraisal to determine your property value until you have spoken with your lender about the process.

If you have an FHA loan — two things must happen in order to cancel mortgage insurance — the UFMIP account must be depleted completely (this takes 60 months from when you took out your loan) and you must have paid down the principal to 78% of your original loan balance. FHA monthly mortgage insurance does not take in to account any property appreciation that may have occured.

One of the more popular questions I am asked recently is “does it cost money to lock your loan?” and the truth is — there is not a right answer.

The reason there isn’t any one answer to this question is because each lender handles loan locks differently. Some lenders lock you early in the process before sending you the initial disclosures and charge a fee that appears to be a “lock fee” but is really a “commitment fee”. The normal “commitment fee” is somewhere between $300 and $600 from what I have seen.

The lenders who I have seen charge a “commitment fee” are typically large, national lenders who have call centers and your loan officer is really a call center employee who only locks you in and then lets someone else take over your file once locked.

Some lenders don’t charge a fee at all to lock your loan – these are typically traditional mortgage shops where the loan officer is a true outside sales person and is generally a professional who is being a loan officer as a career. Most often, these lenders will have you complete the initial disclosures and then once completed, they will work with you to decide the optimal time for you to lock in at the lowest possible rate.

Typically when you lock – the initial lock period will be for 15, 30 or 45 days. Each lender has different lock possibilities, but these are the general timeframes that lenders offer for locking. Unless your file is already through underwriting, I would caution you about locking for 15 days — turn times are usually just not short enough for you to get your file done in less time.

IF — you get to the point where your lock is about to expire, then it is usually possible to extend the lock – at a fee. Who pays the fee — you or the loan officer? From what I have seen — usually the loan officer will pay the fee and take it out of his commission – but if the lock is going to expire because you were late getting something needed to complete the loan, be ready for the loan officer to ask you to pay it.

A typical lock extension costs about .25% of your loan for a 15 day extension — but again, this amount will vary by lender.

So back to the original question: does it cost money to lock a loan? It depends on the lender and yes, it usually costs money to extend the lock on a loan no matter who you are working with.

Recently, the Comptroller for the US John Dugan told a meeting of the American Bankers Association that there were problems lurking with Reverse Mortgages — and even went as far as comparing reverse mortgages to subprime mortgages.

“While reverse mortgages can provide real benefits, they also have some of the same characteristics as the riskiest types of subprime mortgages – and that should set off alarm bells,” Dugan said. ” I believe that now is the time to get out in front of this issue – before real problems develop – so that reverse mortgage providers make these loans in a way that is prudent for both lenders and borrowers.”

Reverse mortgages have grown in popularity recently and will most likely continue to grow in popularity simply due to the sheer number of people who are reaching retirement age. The baby boomer generation was not known for their saving – and it is probable that they are going to depend on their home equity as a source of retirement income.

Dugan went on to describe some of the potential problems with reverse mortgages:

Mr. Dugan said the ability of consumers to access their home equity through immediate and large lump sum payments can pose substantial risks. For example, lenders may simultaneously and aggressively market investment, insurance, or annuity products or, worse, attempt to condition loan approval on the purchase of such products. Likewise, with access to large lump sums upon closing, elderly borrowers can be particularly vulnerable to coercive sales of annuity and long term care insurance products that are expensive and may not be appropriate to their needs.

“Another risk is that reverse mortgage borrowers, because they have no immediate repayment obligations, may overlook substantial fees that are attached to the loan,” Mr. Dugan said. “And consumers who spend their loan proceeds quickly or unwisely may end up short of the funds they need for home maintenance or property taxes, with disastrous consequences: the failure to make those payments can result in foreclosure.”

While there may be some regulation loopholes that need to be closed, almost all reverse mortgages are insured by FHA and are originated through the FHA mortgagee program — meaning that FHA has the authority to change the regulatory problems as needed.

So if someone is worried about FHA insured reverse mortgages becoming “the new subprime”, then this is something that can be avoided by FHA stepping in and making the needed changes.