What Is Private Mortgage Insurance?

Private mortgage insurance, also known as PMI, is insurance on your mortgage that might be required if you are funding your home with a conventional loan. When it comes to PMI, this insurance is for the lender, not the buyer, if you stop making payments on the loan. PMI is typically provided by a private insurance company and set up by the lender you are working with on your financing. It is usually required if you are making a down payment less than 20 percent of the home. If you are refinancing and your equity is less than 20 percent of the home’s value, PMI is also usually required.

Ways to Pay Private Mortgage Insurance

When it comes to paying for a home, there are different kinds of credits and discounts that you can look into as it’s already a substantial purchase, but what some don’t know is that there are different ways to pay for the PMI or not pay for it at all.

The first decision that comes with figuring out PMI payments is discussing your options with the lender of your choosing. Some lenders have options for payments, so that’s a good place to start. The first way to cover your PMI is with a monthly premium that is added to your mortgage payment. Another way to cover the PMI is with an up front payment which is paid at closing. Depending on your lender, you may be able to combine the two options with an up front and monthly premium.

Do I Have To Pay It?

One of the reasons that people pay the PMI is that it can help to qualify you for a loan that you may not have been approved for without it. But that doesn’t mean you can’t buy a home without paying it. There are some lenders that do not require you to pay a PMI but that may mean you end with an overall higher mortgage payment.

There is also an option to cancel your insurance after you’ve reached a certain level of equity in the home. Another way to avoid paying the PMI is to work with a lender on a different type of loan. As previously mentioned, the PMI is used with conventional loans that don’t have a certain down payment. If you are considering buying a home and want to avoid paying the PMI, you can also wait until you have the down payment needed to avoid paying it.

Contact Us Today

Figuring out the details when it comes to financing can be confusing and bring up a lot of questions. We know that there are lots of options and want to help you choose the right ones for you. Don’t hesitate to reach out to Family First Mortgage today!