You Can Never Have TMI about PMI

When it comes to buying a home, whether it is your first time or your fifth, it is always important to know all the facts. With the large number of #mortgage programs available that allow buyers to purchase a home with a down payment below 20%, you can never have Too Much Information (TMI) about Private #mortgage Insurance (PMI).

What is Private #mortgage Insurance (PMI)?

Freddie Mac defines PMI as:

“An insurance policy that protects the #lender if you are unable to pay your #mortgage. It’s a monthly fee, rolled into your #mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.

Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your #mortgage payment.”

As the borrower, you pay the monthly premiums for the insurance policy, and the #lender is the beneficiary. Freddie Mac goes on to explain that:

“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your #mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.” 

According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 6%, while repeat buyers put down 14% (no doubt aided by the sale of their home). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.

Here’s an example of the cost of a #mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:

The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Bottom Line

If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and to help you make the best decision for you and your family. http://www.simplifyingthemarket.com/en/2016/11/16/you-can-never-have-tmi-about-pmi/?a=242769-4eb2112ad1caac540e99a63dd199d5ed ❤️ #share #mortgage