Removing that pesky Private Mortgage Insurance (PMI)!

I like saving money, don’t you!! So, how can you make that line on your monthly mortgage statement called Private Mortgage Insurance, better known as PMI, go away? PMI is often misunderstood and we quite often hear from borrowers, loan officers and realtors the popular statement of “all PMI stops at 80%”. However, that’s incorrect and there are definite nuances that you should know about so let’s review PMI.

Let’s drop that PMI aka saving money …..

If you took out a conventional (Fannie Mae or Freddie Mac) loan when you purchased your new home and didn’t put down a 20% down payment, then odds are you have PMI on your loan. For some homeowners, refinancing is the ideal way to drop PMI, because they can also lower their interest rate and save a great deal of money. But the good news is refinancing is not the only way to rid yourself of PMI. This monthly cost can be eliminated when certain criteria is met. In fact, Federal law (The Homeowners Protection Act of 1998 or HPA Act) requires loan servicers to terminate PMI when these conditions are met and provides three options for terminating PMI.

 Option 1 – Borrower Requested PMI Cancellation: Once the loan balance is paid to under 80% of the original price, the borrower may request (in writing) that PMI be cancelled on the cancellation date. The cancellation date means either the date when the principal balance is first scheduled to reach 80% of the original property value (lower of purchase price or appraised value) or date on which the principal balance reaches 80% of the original value based on actual payments. The borrower may make extra payments to move up the cancellation date. For this option the following conditions must be met:

• You submit a written request for cancellation

• Borrower must be current on the loan.

• No additional subordinate liens

• Must provide evidence satisfactory to the note holder that the current property value has not declined below its original value (usually the original sales price). This basically means you will probably end up paying for a new appraisal. If trying to use current value (presumably higher) than please note most loan servicers have a minimum 2-year seasoning requirement. In addition, if the loan has been seasoned for less than five years than Fannie/Freddie Mac will require the LTV to be below 75% if you are using current value (which is presumably higher than the value at the time of purchase).

Option 2 – Automatic PMI Cancellation: Better news …. Even if you don’t ever ask, your servicer still must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments on the anticipated termination date. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date. “Good payment history” means no payments 60 or more days past due within 2 years and no payments 30 or more days past due within 1 year of the later of the cancellation date or the date you submit a request for cancellation. To determine the “automatic” cancellation date ask for an amortization schedule and then see when the loan balance will reach 78% of the original purchase price.

Option 3 – Final Termination at the Mid-Point: If all else fails you can still drop PMI on most conforming loans. This “final termination” is at the midpoint of the amortization period. For example, on a 30 Year loan the PMI must terminate after 180 payments (as long as the Borrower is current).

Outside the Box …..

There are a few instances when Option 1 and 2 do not apply. These include when PMI was required and the loan was either a second home or investment purchase or the property type was a 2-4 unit. These types of loans are considered “high risk” and are not subject to the HPA rules. However, as long as the Borrower is current, PMI must still be terminated under Option 3. The other category is for Lender defined High Risk Non-conforming loans (better known as Jumbo loans). This loan type is also not subject to the HPA Borrower requested or Automatic termination features. Nevertheless, PMI for these loans is required to be dropped when the loan is scheduled to reach a 77% LTV based on the lower of the original value or original loan balance (and you are current on your mortgage payments).

Out of luck if …..

It’s important to note that Private Mortgage Insurance (PMI) is for conventional loans, not Government-backed loans such as FHA, VA or USDA. But let’s still give you a run-down on these loan types.

FHA – In addition to the upfront MI you paid (or most likely financed) when you took out the loan, FHA charges a monthly MI fee. The majority of FHA Borrowers fall into one of two scenarios. Scenario A – Sorry, but if you put down less than a 10% down payment than this monthly MI fee will continue for as long as you have the loan. The annual MI fee percentage (currently 0.85%) on FHA Loans remains in place for the entire 30-year term but because it is based on the remaining mortgage balance, the dollar amount decreases slightly each year as your loan balance amortizes down. Scenario B – If you did put 10% or more down as the down payment than the monthly MI will be eliminated after 11 years.

USDA – Similar to FHA, this loan type also has an upfront and monthly MI fee. The annual fee (currently 0.35% X the loan balance) is recalculated each year based on the new balance of the mortgage. The annual fee percentage on USDA loans remains in place for the entire 30-year term but because it is based on the remaining mortgage balance, the dollar amount decreases slightly each year as your loan balance amortizes down.

VA – Thankfully, VA loans do not require monthly PMI so you don’t have to worry whether it falls off or not. However, like all government-insured loans, VA loans do have a funding fee which is an up-front fee that is customarily financed on top of the loan amount.

Written by Michael Scott


The IRS recently issued some guidelines that allow real estate investors to take a tax deduction for up to 20% of the income they generate from rental properties. These guidelines were issued in January 2019 to clarify certain provisions of the 2017 Tax Cuts and Jobs Act. Click here to view the full announcement and the new guidelines.

The new tax deduction is generally available to eligible taxpayers with 2018 taxable income at or below $315,000 for joint returns and $157,500 for other filers. Those with incomes above these levels are still eligible for the deduction but are subject to limitations. In order to qualify for the deduction, the taxpayer must meet three requirements:

1 – Maintain separate books and records to reflect income and expenses for each property or group of properties.

2 – Perform 250 or more hours of rental services per year. Rental services include:

  • (i) advertising to rent or lease the real estate;
  • (ii) negotiating and executing leases;
  • (iii) verifying information contained in prospective tenant applications;
  • (iv) collection of rent;
  • (v) daily operation, maintenance, and repair of the property;
  • (vi) management of the real estate;
  • (vii) purchase of materials; and
  • (viii) supervision of employees and independent contractors.

Rental services may be performed by owners or by employees, agents, and/or independent contractors of the owners. The term “rental services” does not include financial or investment management activities, such as financing; procuring property; studying and reviewing financial statements or reports on operations; planning, managing, or constructing long-term capital improvements; or hours spent traveling to and from the real estate.

3 – Maintain contemporaneous records, including time reports, logs, or similar documents, regarding the following:

  • (i) hours of all services performed;
  • (ii) a description of all services performed;
  • (iii) the dates on which such services were performed; and
  • (iv) who performed the services.

The contemporaneous records requirement will not apply to taxable years beginning prior to January 1, 2019.

Keep in mind that real estate used by the taxpayer for any part of the year does NOT qualify for the deduction (such as a rental property that’s also used as a vacation home).


Source: CMPS Institute

Time to file your Homestead Exemption!

It’s that time of year to remind everyone who bought a home in 2018 to make sure you send in the information to get your homestead exemption filed. Please DO NOT pay to have this done; it’s free to file and can be done in just a few minutes. Check out the info below for details.


If you purchased a home that you occupy as your primary residence, you are entitled to the property tax exemption. I am sure you take as many IRS tax deductions as you are allowed; this is a similar concept. The exemption reduces a homeowner’s property tax bill by removing part of the home’s value from taxation.

For example, your home is appraised at $100,000, and you qualify for a $25,000 exemption (this is the amount mandated for school districts), you will pay school taxes on the home as if it was worth only $75,000. Taxing units have the option to offer a separate exemption of up to 20 percent of the total value.

Once you receive the exemption, you do not need to reapply unless the chief appraiser sends you a new application. In that case, you must file the new application. If you should move or your qualification ends, you must inform the appraisal district in writing before the next May 1st.


When the local Counties economy thrives, property values can increase by 20%, 25% and even 30% in a year. We have been experiencing this in the Austin area over the last several years. The Homestead Cap is an amazing feature in the fact that it restricts the amount that the assessed value of a residential property may increase from year-to-year! The appraised value can go up a maximum of 10% each year until it reaches the full market value.

Appraisal districts are required to appraise properties at their fair market value as of January 1 of each year. You qualify to have your appraised value capped if the property is your primary residence and you have had exemptions in place for two years. This means that the property will be appraised at full market value for the first year that you qualify and receive a homestead exemption.

When you qualify for a homestead cap, the second year you own the home, your market value and appraised value may not be the same. The market value may increase by any percentage over the previous year, but the “cap” makes sure that you are not taxed on an increase of more than 10%. Without the Homestead Cap it’s no-holds-barred!


You may file an Application for Homestead Exemption with your appraisal district for the $25,000 homestead exemption up to two years after the taxes on the homestead are due. You should go ahead and file in order to possibly get a refund for the last two years and also to get the assessed value cap in place!


If you recently bought a home a just read that you have two years to file, DO NOT WAIT. I cannot tell you how many people have forgotten to file and have lost thousands of dollars! Carve out a few minutes to get this done online.


• You must own your home on January 1st of the year for which you are applying.

• You must reside at the home as your principal residence on January 1st of that year, and not claim any other property as homestead.

• Only individual homeowners (not corporations or other entities) may receive a homestead exemption.

• A homestead can be a house, condominium or a manufactured home. It can include up to 20 acres, if the land is also owned by the homeowner and used as a yard, or for another purpose related to the residential use of the home.


I have provided links to a few of the counties in the Austin area. CLICK HERE for the downloadable version of the Homestead Exemption Form for the State of Texas which can be mailed in to the County along with the required additional documentation (see appropriate county website for details as they will deny your application if not submitted correctly).


Mailing Address:

P.O. BOX 149012

Austin, TX 78714

Travis Central Appraisal District Website:


Mailing Address:

625 FM 1460

Georgetown, TX 78626

Williamson Central Appraisal District Website:


Mailing Address:

21001 IH 35 North

Kyle, Texas 78640

Hays Central Appraisal District Website:

Credit Tip – Charged Off Credit Cards


Today I want to thank Matt with Synergy Credit Pros for the great information! Give him a call for personal credit repair. They are the real deal! Matt “The Bureau Crusher” Johnson @ 281.971.9887.

As you have learned before in the past from our credit tips, paying off most collections will have a negative impact on the credit score.

Why is it that paying off a charged off credit card that is held by the original creditor, the only collection that will boost your credit score? The reason is because a charged off credit card is impacting two sections of the client’s credit score where all other collections are impacting only the payment history section of the credit score. When you pay off a collection, it will push forward the date of last activity and the reporting dates which will have a negative impact on the credit score.

However, when you pay off a charged off credit card held by the original creditor it will also clear up the amounts owed section of the credit score. So, when you pay off a credit card, it will push forward the reporting date and date of last activity which will drop the score about 10-20 points but will also see a gain of 40 points by clearing out revolving balances, which will net the client 20-30 points.

If the charged off credit card is transferred from the original creditor to a third-party collection company, it will not benefit the client because it is now an O-9 instead of an R-9 so it is not impacting the amounts owed section of the credit score anymore. If the charged off credit card is 4 years or older, we do advise you to call us first to look at the report and make sure it is an account that will benefit the client. If it is 4 years or younger, you can go ahead and have the client pay it off because it will be beneficial for the score.

Be sure to check out my website for more credit tips and tricks as well as other useful information about the homebuying process!

Appraisal Waivers Help You Get Into A Home Quickly!

Not every loan requires an appraisal!

Both Fannie Mae and Freddie Mac started collecting data on every appraisal they received a few years back (yes, big brother is always watching). They began storing every detail from the appraisals and created their own information database which pinpoints a specific property and looks at all of the recent information they have about properties around it in order to determine if they think the value or sales price is accurate. Since Fannie and Freddie are the primary sources of mortgage providers across the U.S., chances are they have all of the information for the home that just sold a few doors down. As long as they feel like the value is not inflated or they do not feel that you are in a declining market, they might offer you an appraisal waiver which means they are good to go with the value of the property offered.

Not every loan qualifies for an appraisal waiver, so let’s look at what is need to qualify.

Fannie Mae


  • Must be a one-unit property (including for condos).
  • For a rate/term refinance on a primary residence or second home, you need at least 10% equity; 25% on investment properties.
  • Purchase:
    • Must be a one-unit property, (including condos).
    • You need at least a 20% down payment on a primary residence or second home. Investment properties aren’t eligible.

It is also worth a mention that if an appraisal has already been done (by the lender or recently by another potential buyer and lender where the deal may have fallen through), that value is used and the property would not be eligible for the waiver.

Freddie Mac

  • Must be a one-unit property, including condos.
  • The loan must be a new home loan or a rate/term refinance.
  • You must have a 20% down payment for buying a home, 20% equity for refinances.

The waiver is property and borrower specific so it can be hit or miss but always worth a shot. I should also mention that the waivers are only eligible on Conventional Conforming loans and that not every lender will offer the appraisal waiver option due to their own internal guidelines/requirements. If you meet the down payment requirements listed above, I will always run your loan through both the Fannie Mae and Freddie Mac automated underwriting engines to see if either one gives us the waiver to help ensure your loan process is as smooth as possible! As always I am here with any questions you might have! I am always here to help!

Grant funds available thru Capstar Lending in Texas

Todd Kurio is pleased to announce another Down Payment Assistance offering via Capstar Lending’s participation in the SETH GoldStar Program. This program provides assistance in the form of a forgivable 2nd lien. The maximum amount of Assistance to be provided is 7% and is based on the final loan amount. The Assistance is forgiven equally each month and is considered completely forgiven after 7 years. Funds can be used toward your down payment and closing costs. The program also provides a 30 year fixed rate mortgage. Mortgage options are FHA, VA, and Conventional. There is no pre-payment penalty or federal recapture tax for the mortgage loan. You can own other property if you are doing an FHA or VA loan but can’t own any other residential property for a conventional loan. Effective 4/1/18, the income limits for a conventional loan in Travis County was $137,600. Minimum FICO Score of 620 and maximum sales price of $453,100 on conventional. This program is available in Texas but outside of Travis County.

For more information please call Todd Kurio, Residential Mortgage Loan Originator. 512 459 2405, NMLS #214411/216616, Capstar Lending, Equal Housing Lender.

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.

How To Protest Property Tax Values

Have you protested to lower your property taxes? I just filed to protest mine. There is a good chance you should. There are several services that will do this for you. Usually they charge a percentage of the tax savings, so if they wind up being unsuccessful you will not owe them anything. However, I prefer to protest my own taxes. It doesn’t cost anything and I feel I know my neighborhood best. Below is a very detailed step by step guide I put together several years ago.

  1. As quickly as you can, send in the form on the back of the county’s appraised value notice to protest the property taxes. There is a deadline, you don’t want to miss your opportunity. If you request a protest, you don’t have to follow through with it if for some reason you change your mind.
  2. If you purchased your home in 2017 and it appraised higher than the price you paid, make a note of this. With a copy of the settlement statement, they’ll usually simply lower it to the price you paid. You are not obligated to provide them with any information, so if the appraised value is lower than the sales price it is a good time to stay quiet. If you have owned your house a few years you may discover the county has it appraised for less than it is worth, so you may not want to protest at this time.
  3. When sending in the protest form, make sure to request the data the county appraisal district used to assess your home. They are required to provide it if you ask for it. This will be important in step 6.
  4. After a long time, the county will reply with a notice of a date for an informal protest and a formal protest. They will also include a packet with their details about your home as well as a spreadsheet of the comparison homes they used to arrive at their data.
  5. Make sure the data they have for your home is accurate. I’ve had properties where the square footage in the county records was larger than the actual square footage. Simply showing the square footage calculations from the appraisal lowered the appraised value not only for that year, but going forward. Other inaccuracies might include the condition of the property or structures that are no longer there. This also can go the other way, which you may not want to bring the assessor’s attention with a protest.
  6. Make sure the properties they are using for comparison are actually similar to your property. The comps should be of the same type and within the same neighborhood. I’ve had single family houses incorrectly compared to commercial property, much larger properties, duplexes and properties in other non-comparable neighborhoods. More commonly, houses that may look similar from the data on their spreadsheet are different in real life. For example, if you have a 20 year old kitchen and all the properties they are comparing your home to have been fully updated.
  7. Find properties that are more comparable and support a lower value. The best data is closed MLS listings from your immediate neighborhood. Most real estate agents are more than happy to help with locating these. Of course, these listings must support a lower value. It is very possible that the values in your neighborhood have gone up and the tax assessor is correct.
  8. Make notes of all items with your property that may negatively affect your home’s value compared to any higher valued properties, especially items that won’t show up on their spreadsheet. For example, do the comparable properties have similar-sized lots but your lot has a portion that is not buildable due to a flood plain, terrain or irregular shape? Is your lot on a busy road or adjacent to commercial buildings? Does it lack the view that other nearby properties might have? Have the comparable properties been updated and remodeled or expanded while your house has not? If your house needs foundation work or a new roof, bring in bids, photos or other documentation.
  9. By state law, the value the appraisal district is considering is as of January 1 of this year, so what is important is the condition of the property at that time. Comparable properties from the previous year can be used.
  10. Attend the informal hearing with your data. This hearing is a meeting with a county appraiser in his or her cubicle. Usually there will be an unhappy property owner with no data ranting at the appraiser in the adjacent cubicle. That approach will not be successful, and the appraiser will be happy to have someone in front of them not doing that. Show the appraiser everything to support your claims. He or she will want copies of anything that they use to update your file. Photographs are helpful, as are documentation of closed sales and maps. I have found the county appraisers very reasonable when they have data to review. However, they will never take your word for it that you think your house isn’t worth that much and they should just lower that value right now.
  11. If you are not successful and still feel you have a good case and good data, you can move on to the formal protest. This is a hearing with a county appraiser on one side and you on the other. Three paid, citizen appointees listen to documentation from both sides and vote on an outcome. I’ve had four formal hearings. Three were successful, with the appointees asking relevant questions of both sides and considering the documentation. The third was unsuccessful and featured one of the appointees who couldn’t do simple math and one who fell asleep during the hearing.

It doesn’t cost anything other than time to protest, and a successful protest may lower your taxes this year and in future years if there is incorrect information in the county records. If you do not want to spend the time to protest, there are services that will protest your taxes and their fee is a portion of the savings.


Contrary to popular belief, mortgage interest is NOT always tax deductible. Here’s some basic information to help guide you to determining if your mortgage interest could be deducted:


First thing first, you cannot take the mortgage interest deduction if you are taking the standard deduction. In 2018, the standard deduction is $12,000 for single taxpayers, $18,000 for heads of household, and $24,000 for married taxpayers filing a joint return. In 2013, 30% of households itemized their deductions and experts are expecting the number of people that itemize to decrease with the increase in the standard deduction. Please see a CPA for details.


Mortgage interest is only deductible if the mortgage is attached to a “qualified residence”. Taxpayers can generally deduct the mortgage interest on two qualified homes:

  • One Primary Residence; and,
  • One Vacation Home


Your mortgage or home equity line of credit is considered “acquisition indebtedness” if it was used to buy, build or improve a qualified residence. Generally, you can deduct the interest on mortgage balances up to $750,000 of Acquisition Indebtedness. Here are two examples:

  • Jane buys her $500,000 primary residence using a $400,000 mortgage. Jane would be able to deduct the interest on the $400,000 mortgage as acquisition indebtedness because (1) the mortgage was to buy a qualified residence; and, (2) the mortgage falls within the $750,000 limit.
  • Janice buys her $500,000 primary residence with cash.  A year later, Janice does a cash-out refinance and puts a $400,000 mortgage on the home.  The funds are not used for home improvements. Janice would NOT be able to deduct the interest on the new $400,000 mortgage because the funds were not used to buy, build or improve the house.


As you can see, it’s very important to structure your mortgage in a way where it can be classified as “acquisition indebtedness”! Here are three common mistakes that many people make when choosing a mortgage strategy and deducting their mortgage interest:

  • Pulling cash out of a primary residence to buy a vacation home, and then illegally deducting the interest on that cash-out mortgage (in these cases, it’s often better to place a mortgage on the vacation home itself so that it can be classified as “acquisition indebtedness”)
  • Paying cash for a home, taking out a mortgage later on, and then illegally deducting the interest on that cash-out mortgage
  • Illegally deducting the interest on mortgage balances that do not qualify as acquisition indebtedness

DISTINCTION BETWEEN A QUALIFIED RESIDENCE AND AN INVESTMENT PROPERTYEverything mentioned above pertains to a mortgage transaction involving a primary home or vacation home that is elected as a “qualified residence” for tax purposes. If your transaction involved an investment property, see IRS Publication 527.


Stephanie Donnell

Residential Mortgage Loan Originator

NMLS Number: 1031976


Capstar Lending, LLC NMLS 214411 ( 6836 Austin Center Blvd #110; Austin TX 78731 512-459-2400. Capstar Lending, LLC is an Equal Housing Lender. This is not an offer to enter into an agreement. Information, rates and fees are subject to change without prior notice. Loan approval is subject to applicant’s qualification for a loan program. All products are subject to credit and property approval. Capstar Lending, LLC is not affiliated with any government agency. Intended for Texas consumers only, Texas- SML Mortgage Banker Registration. Residential Mortgage Loan Originator.

$1500 in Extra Down Payment Assistance Available


Capstar Lending through the State Affordable Housing Corporation is offering $1500 in Extra Assistance to borrowers with incomes at or below 80% AMI who use our Preferred Conventional Product.

For more information please call Todd Kurio, Residential Mortgage Loan Originator. 512 459 2405, NMLS #214411/216616, Capstar Lending, Equal Housing Lender.

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.

Help is on the Way with Your Credit Report

Read about the National Consumer Assistance Plan and how it will make credit reports more accurate.


Medical debts won’t be reported until after a 180-day waiting period to allow insurance payments to be applied. The credit reporting agencies will also remove from credit reports previously listed medical collections that have been or are being paid by insurance.

The credit reporting agencies will provide special attention to consumers who are victims of fraud or who have credit information belonging to another consumer on their file.

For more information on credit reports, please call Todd Kurio, Residential Mortgage Loan Originator. 512 459 2405, NMLS #214411/216616, Capstar Lending, Equal Housing Lender.

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.