What is PMI?

  What is PMI?  This is a question I get all the time, so PMI is Private Mortgage Insurance.  What that is is insurance policies that protect the lender, not you, but guess who has to pay the premium, you!  I know, that is ridiculous, but it's what happens when you don't put 20 down on a house, so if you put five percent down, ten percent down, three and a half percent of your FHA you will pay PMI.  Now sometimes when you pay PMI, the interest rate becomes smaller, and so your payment actually balances out, so sometimes it's to your monthly advantage to pay PMI, where it becomes difficult though is that it never goes away on an FHA, you're always going to pay that PMI where if you have a conventional loan, loan not backed by the way that the government does it with the FHA, what happens then is once you hit that 80% to 20% low value so you owe 80% and you have 20% equity, they take the PMI off, so your payment goes substantially down, $100-$200 a month typically, so you want to make sure you ask the question "Is the PMI in there forever?" "Is it in my favor?" and "Who does it protect?".  Well, there's the scoop, Edna Wilson, your Hometown Realtor, as Hometown as Apple Pie!

Post a Comment