All About PMI

Private Mortgage Insurance (PMI) is a type of insurance that protects a lender in case the borrower defaults on a loan. Lenders often require PMI when the buyer has a down payment of less than 20% of the asking price of the home.

Rather than having to find an insurance company that provides PMI, Lending Tean will arrange PMI for you

There are usually several options for paying PMI:

Added to monthly mortgage payment. To make things easier, we can simply add this to your monthly mortgage payment. The insurance premium is held in escrow and then we pay the insurer for you.

Paid separately monthly. You can elect to make your PMI payments directly to the insurer, separately from your monthly mortgage payment.

Paid in one lump sum at closing. Some insurers allow you to pay your PMI premium in one lump sum at the time of closing.

Paid partially at closing with remainder spread out among monthly payments. To lower your monthly payments, you can pay a portion of the PMI at closing and then spread the remaining payments out monthly.

PMI premiums do not last forever. You pay mortgage insurance premiums until you have enough equity in your home to have a loan-to-value ratio (LTV) — the amount of money you borrowed divided by the value of the property you bought — of 80 percent. The longer you pay down your mortgage, the lower your LTV will become. Once your LTV reaches 80 percent or less, you are no longer required to pay for PMI.

How much does PMI cost? Like everything else, it depends on several factors, such as your credit score, the amount of money you have for your down payment, and insurer. But typically, the premiums for private mortgage insurance range from $30-70 per month for every $100,000 borrowed.

There are a few types of loans which do not require PMI. VA loans do not require a down payment and do not require mortgage insurance, though they do require an upfront funding fee.

Still have questions about PMI? Contact a representative from Lending Team today and we can answer them for you.