Private Mortgage Insurance

Private Mortgage Insurance

Ideally, when you purchase a home you should have enough money accumulated for a down payment so that your down payment represents 20% or more of the purchase price.

Why 20 percent? Almost all lenders require you to obtain (and pay for) private mortgage insurance (PMI) if your down payment is less than 20 percent.

PMI adds several hundred dollars annually to the cost of your loan and it protects the lender financially if you default.

Not only will this increase your monthly payment, but you can also expect worse loan terms, such as higher up-front fees and/or a higher interest rate if your down payment is less than 20 percent.

Some lenders are now offering 80/15/5 loans that enable you to avoid PMI. This means you can put down 5% and have two loans, one at 80% of the purchase price and the other at 15% of the purchase price. However, you can expect to pay a higher interest rate on the second loan of 15%.

The more you can put down on the purchase of your home the better interest rate you are going to get. Another type of loan to avoid PMI is an 80/10/10 loan. This requires a 10% down payment and you should be able to get a better interest rate than if you got an 80/15/5 loan.

PMI isn�t a permanent cost. Your need for PMI vanishes when you can prove that you have at least 20% equity (home value minus loan balance outstanding) in the property.

The 20 percent can come from loan paydown, appreciation, improvements that enhance the value of the property, or any combination thereof. Note also, that to remove PMI, most mortgage lenders require that an appraisal be done - at your expense.

If you are looking to buy or sell a home in North Texas and need help deciding what type of loan is right for you, please take a moment to fill out the form below and you will be put in contact with a top notch RE/MAX real estate professional who can handle your real estate needs including referring you to a mortgage lender.

Home Buyer / Home Seller Form

Please note that all fields followed by an asterisk must be filled in.

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Are you looking to buy or sell a home?

	A Buy
	B Sell

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If you are buying a home, have you been pre-qualified by a lender?

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If you have been considering the purchase of a new home, there are several distinctions between the DFW market and the national averages. Learn more about the DFW housing market at: DFW Housing Facts

Real Estate Guide - Answers to your real estate questions.

Much more than private mortgage insurance discussed back at the Home Page