PMI stands for Private Mortgage Insurance. In essence, PMI is the insurance you pay on mortgages with a low down payment, typically less than 20% of the home’s value. Unlike other insurance, PMI is not to protect you – It offers security for lenders and investors and protects them from defaults on loans. PMI is generally required both when buying a new home with a low down payment, or you’re refinancing and your equity is below 20%.
PMI is something you should keep in mind if you’ve qualified for a low down payment loan. It’s a monthly premium added to your mortgage payment, and you should definitely factor it in when choosing what kind of loan you want to take for your home.
The best practice is to save for the highest down payment possible. If you can, save and put down 20% on your home – then you can avoid PMI all together. But regardless, the more you can put down, the less PMI you have to pay. Once you have paid 20% of your home’s value, you can stop paying PMI on your loan in most cases.
Hope this helps! If you’re looking to get a mortgage and are wondering what your options are, give us a call! We’re a Christian Mortgage Lender, and we think we’re like you – focused on faith and family. We’d love to help you find the perfect loan to get you into the home of your dreams.
Best,
Audrey
The Christian Mortgage Mom
