April 16, 2014
What is PMI? What can you do to avoid paying it and why should you?
What is PMI? What can you do to avoid paying it and why should you?
PMI is private mortgage insurance. You have to pay this when you do not put at least 20% down on the house when you buy it. You do not get any benefit from it and it only helps the bank out in chase you default on your loan. It can add up to a large amount of money that you have to give the bank. If you dont have the 20% you dont have any business buying that house yet, buy a house that is closer to your budget or wait until you have enough money saved up that you can put down the 20%. You also dont want to use up all the money you have to reach that 20%, you want to have a good amount of money left over for other expenses involved with buying the house, such as some fix ups or the closing costs. The more you can save the better.
Right again, Garrett. Let’s review.
PMI is tacked on to your mortgage payment to provide insurance to the lender in case you fail to follow through on the contract you signed with them. Garrett is right. If you don’t have the 20% to put down, wait until you do. Paying PMI is truly money thrown down a gutter. Not only are you squeezing into a home you cannot afford, but you will not have the money to cover expenses that you will incur when you move in. That is when the credit card comes out and it goes downhill from there. DO NOT pay PMI!