HomeBuyer University: Buying a Home, Just Got Easier
Course 2: Things Every Home Buyer Should Know
Step 1: Mortgage Approval Factors
Step 2: Understanding Mortgage Payments
Step 3: Renting vs. Buying
Step 4:Mistakes to Avoid
Step 5:Home Inspection Negotiating Tips
Understanding Mortgage Insurance
Private Mortgage Insurance (PMI) is an insurance policy mortgage lenders require to cover its losses when a property owner fails to pay their home loan. Since a mortgage lender is likely to take a substantial loss if they foreclose on a property, PMI offsets that loss and risk. PMI applies to a first mortgage where a borrower is obtaining financing for over 80% of the property’s value.
PMI rates vary based on loan type and how much you borrower compared to the home’s market value. Borrowers should speak with a loan officer to get precise figures and see how the PMI will impact the mortgage payment. PMI factors may also change. For this reason, it is important to get current PMI rates. Upon the closing of your new home, the PMI factor will not change.
Advice on Getting Rid Of PMI
Recurring monthly PMI payments will automatically end when the mortgage balance is paid to below 80% of the original purchase price. PMI may end a little earlier if an appraisal demonstrates the home’s current value has increased, making the remaining loan amount 80% or less than the current value. (This must be initiated by the homeowner).
PMI enables you to purchase a home without having a down payment of 20%. By understanding how PMI works and how to end it, you can avoid paying more PMI than needed. For information or questions regarding PMI, call First World Mortgage at 860-236-LOAN.