WHY DO I NEED PRIVATE MORTGAGE INSURANCE (PMI)?

PMI is insurance that lenders require for borrowers seeking loans of more than 80% of a home's purchase price. PMI protects the lender if default should occur, and enables homebuyers with down payments of less than 20% to purchase homes. Generally, if you put down 20% or more, you won't need PMI.

Private mortgage insurance costs vary depending on the size of the down payment you've made and the type of home mortgage you're getting. The advantage to you as a home buyer in having PMI is it may enable you to purchase a home with a lower down payment - a benefit for first-time home buyers. The cost of private mortgage insurance is generally a half of one percent of the value of the loan, so a $200,000 mortgage times .005 is $1000 or $83 a month added to your mortgage payment.

Most lenders will allow you to discontinue PMI once you've paid down 20 percent of the equity in your home, but it's up to you to notify them when you reach this point.



MORTGAGE Q&As

What is a Loan that Originated in a Portfolio?
What is the "Secondary Market"?
What Kind of Documents are Required for a Loan?
What is a Credit Check and Who Performs Them?
What Does a Lender Have to Disclose to You by Law?
What is PITI?
Why Do I Need Private Mortgage Insurance (PMI)?
Where Do I Get Private Mortgage Insurance (PMI)?
What is an Interest-Only Loan?
What are the Limits on FHA Loans?
What Is Seller Financing?
What are the Primary Institutions of Money and Mortgages?
What is the Advantage of Using a Broker for my Home Loan?

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