Susan Hilton College Station Real Estate
Realtor & Vice President of Sales
Read my blog below
What is Mortgage Insurance and Why Do I Need it?
July 25th, 2008 Categories: Buying Real Estate
Mortgage insurance is normally known as Private Mortgage Insurance (PMI). It typically is only talked about with conventional loans but read on – there is more and it will cost YOU money!
Mortgage insurance is like an insurance policy that protects the lender against some (or most) of the loss that results if the homeowner defaults on the home loan. When the homeowner defaults, the property is either sold through a short sale or is foreclosed. Either way there is usually a loss for the lender and that is when the PMI comes into play.
PMI is usually required when a borrower is putting less than 20% into their down payment and financing more than 80%.
Like other insurance (home or auto), there is a premium that must be paid for the insurance. Sometimes this insurance is paid upfront in closing costs (like a VA funding fee), sometimes it is financed into the loan (like what often happens with an FHA loan) and sometimes it is paid through an increased interest rate. Yes, sometimes it is confusing….
How do you know which one you need, how you pay for it and where you get it? Trust me – your lender will help you with this one. There are privately owned companies that provide mortgage insurance or you will have to purchase it through FHA or the VA. The lender checks the PMI company’s guidelines to determine borrower’s eligibility requirements and decides which one will work best with the borrower’s situation. PMI companies normally are stricter in their qualifying ratios and require a larger down payment than FHA but are often less expensive (premiums) than FHA.
So, when you are ready to purchase a home, don’t worry – Call us and we’ll help you get started on the process!
Susan Hilton – Realtor & Sales Trainer for Century 21 Beal
Search the ENTIRE Bryan/College Station MLS? CLICK HERE!!!
Sphere: Related Content
I wonder what it takes to become a PMI fund??? It seems like it could be a lucrative investment
Being a PMI fund could be REALLY lucrative in an UP market but since I’ve been in this business since the creation of dirt… I’ve seen the 80’s when you couldn’t find a PMI company still in business due to the claims.