When you’re buying a home, it’s important to know the facts. With the help of our friends at Keeping Current Matters, today we’ll discuss Private Mortgage Insurance, also known as PMI.
According to Freddie Mac, PMI is “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 of less than 20 percent. Once you’ve built equity of 20 percent in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
The cost of PMI can vary based on the amount you owe and your credit score, but you can expect to pay between $30 and $70 per month for PMI for every $100,000 borrowed. With the average downpayment being 10 percent, it’s apparent that most home buyers did not let a PMI payment stop them from completing the deal.
If you have questions about whether you should buy now or wait until you’ve saved for a larger downpayment to avoid paying for PMI, please contact your Realtor to discuss both the advantages and disadvantages.