October 5, 2013 Admin | October 5, 2013 What is PMI? Who pays it and who doesn’t? How do you get rid of it or avoid it?
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Mortgage lenders make many borrowers purchase mortgage insurance to protect the lender if the borrower is unable to pay the mortgage. In other words, mortgage insurance guarantees your lender will get paid if you default. For the borrower, it has a benefit, too: Getting mortgage insurance allows you to purchase a home before you have the full 20 percent down payment saved up.
The conventional loan has to pay PMI if they don’t have 20% of the down payment saved up. That is one way to avoid it. Save up long enough so that you have 20% of the payment and then you can avoid paying the PMI.
PMI is private mortgage insurance. People who do not have 20% of the price of the home set aside for a down payment pay PMI. People who do have 20% of the price of the home set aside for a down payment don’t pay PMI. You can avoid PMI by having 20% of the price of the home set aside for a down payment.
PMI is private mortgage insurance. It is needed if a home buyer does not have 20% down payment. PMI covers the lender in case the mortgager can not cover the loan payments or if a foreclosure is involved. PMI is an extra payment on top of the mortgage based on the amount borrowed. It is required for those who don’t have 20% down payment and not needed for those who have sufficient down payment. You can get rid of it when the equity is built up to 20% of the loan value either by the payments over time or if values rise or if an appraisal is done and shows sufficient increase. Best way to avoid PMI is by saving 20% before looking for a home.
You three ladies answered the question beautifully. Macala came in first by a matter of seconds! Let’s recap.
PMI is paid when less than 20% is put down on a home (there are exceptions like a VA loan and some “creative” loan procedures). This will increase your mortgage payment without increasing your equity in the home. It’s just wasted money.
The answer is really quite simple. DO NOT buy a home until you have saved 20% for the down payment. DO NOT let others talk you into buying with no money down and no savings. That is a recipe for disaster (credit card debt follows as you move in an get situated in your new home).
Keep life as simple as possible and by all means, DO NOT make it any harder than it has to be. Avoid PMI and you will do just that.