🏡 What Is PMI (Private Mortgage Insurance)?
🏡 What Is PMI (Private Mortgage Insurance)?
If you’re planning to buy a home with a down payment of less than 20%, you’ve probably heard about Private Mortgage Insurance (PMI). But what is it, and why do lenders require it? Let’s break it down.
đź’ˇ What Is PMI?
PMI is a type of insurance that protects the lender—not you—if you stop making payments on your mortgage. It allows buyers to purchase a home with a lower down payment while still giving lenders some financial security.
đź’° How Much Does PMI Cost?
PMI typically costs 0.5% to 1% of your loan amount per year. The actual amount depends on:
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Your loan amount – Higher loans mean higher PMI costs.
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Your credit score – A better score can mean lower PMI rates.
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Down payment size – The closer you are to 20%, the less PMI you’ll pay.
📉 How to Get Rid of PMI
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Reach 20% Equity – Once you’ve paid down enough of your loan, you can request to remove PMI.
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Refinance – If your home’s value has increased, refinancing might eliminate PMI.
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Lender-Paid PMI – Some lenders offer options where PMI is built into your loan rate.
đź“Ś Key Takeaways
• PMI helps buyers with low down payments qualify for a mortgage.
• Costs vary but generally range from 0.5% to 1% per year of the loan amount.
• You can remove PMI once you have 20% equity in your home.
PMI can be an extra cost, but it also helps make homeownership more accessible. If you have questions, I’m happy to help!
🔍 Ready to Learn More?
If you have questions about getting a mortgage or want to explore your options, reach out! I’m here to help guide you through every step of the process.