While the housing market continues to stabilize across the United States, there’s no guarantee that everyone in need of home financing will have a large down payment. However, you shouldn’t let that stop you from obtaining the mortgage you need for the home you love.
If you can still offer a down payment on your dream home, yet less than 20 percent of the appraisal value of the home, you will be required to obtain personal mortgage insurance (PMI). Personal – or private – mortgage insurance is a policy that protects the lender in the event of a client’s default.
PMI differs from government mortgage insurance in that not everyone will be required to obtain a PMI; however, it can’t hurt to sign up for it regardless. Private companies facilitate PMI’s and act as the beneficiary, while you (the borrower) pays the premium. The rates for a PMI vary depending on how much you borrow and how much you are able to offer as a down payment. Typically, rates for a PMI don’t reach above 2 percent. For example, say you buy a $200,000 house and are able to make a 15 percent down payment. You have to borrow $170,000, with a PMI rate of 0.56 percent. If you multiply your loan amount by the premium (0.0056), that makes your annual premium $952, or a monthly payment of $79.33.
If you are a borrower that needs to obtain or is interested in a PMI, please contact us for further questions and details.