There are a couple forms of insurance that may be a required part of the home purchasing and mortgage process, and one of these is known as private mortgage insurance, or PMI. In place to protect the lender for many types of loans, PMI is often required when borrowers are using a lower down payment, plus in some other situations.
At VIP Mortgage Inc., we’re happy to assist clients with the very best mortgage rates and mortgage programs in Phoenix and nearby areas, helping them navigate every important detail of this process. What is private mortgage insurance, what are some of the notable types of PMI, and why is this insurance often required? This two-part blog series will tell you everything you need to know, including some details on how you might be able to cancel PMI after a certain period of time.
PMI is a type of mortgage insurance that is required for home buyers to help protect the lender in the event that they default on their loan. PMI helps the lender offset this loss by providing them with income from ongoing monthly premiums paid by the borrower. It is often necessary for those who are buying a home with a down payment of less than 20% of the purchase price, or home buyers who are taking out loans that have high loan-to-value ratios (LTV).
PMI is an expense that borrowers will pay monthly over the course of their loan, which typically lasts about 30 years. The amount could range from $10-$100 per month, and is determined by your credit score and LTV ratio. In most cases, borrowers will pay PMI for a certain period of time (often 5 or 7 years) on top of their monthly mortgage payment.
There are a few specific types of PMI to consider:
In part two of our series, we’ll go over why PMI is often required, plus the timing involved and your typical options for removing PMI from your monthly payments. For more on this or any of our home loan services in Phoenix, speak to the staff at VIP Mortgage Inc. today.