There are a few different potential costs that may come with your mortgage in a homebuying situation, and one that’s present for many buyers is private mortgage insurance. Abbreviated PMI, private mortgage insurance is a type that’s meant to protect lenders, particularly in cases where they’re offering loans for homebuying situations with low down payments, and will often be required in these circumstances.
At Primary Residential Mortgage, we’re happy to offer great mortgage rate and a wide range of mortgage programs, including some that may involve or even require PMI for borrowers. What exactly is private mortgage insurance and its types, why is it important and often required, and how can you eventually get rid of it as part of your monthly payments? This two-part blog series will go over everything you need to know about PMI.
Speaking as simply as possible, private mortgage insurance is actually a form of insurance that allows the lender to be paid if the borrower defaults on the mortgage. It’s common in situations where the borrower is paying less than 20% of the home purchase price in a down payment – this down payment is often the primary risk-mitigation method lenders take, so when it’s diminished through the offering of a low down payment, lenders need to mitigate in another way.
For PMI, the homeowner pays an insurance premium as part of their monthly mortgage payment. Because so many buyers today are paying under 20% down, PMI is very common. However, once you’ve gained enough equity in your home, you can often eliminate PMI as a need (more on that in part two of our series).
There are several different types of PMI that might be utilized for a given mortgage situation:
For more on private mortgage insurance, or to learn about any of our mortgage rates or home loan services, speak to the staff at Primary Residential Mortgage today.
*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.