What’s PMI, anyways?

If you’re buying a home and hear the term PMI, don’t worry, it’s not as complicated as it sounds. PMI stands for Private Mortgage Insurance, and here’s the quick scoop:

• If you put down less than 20% on a home, most lenders require PMI on conventional loans.
• It is designed to protect the lender if you don’t make payments on your loan.
• The cost can add $100 to a couple hundred dollars a month to your mortgage payment and the amount charged is based on a few things, primarily your down payment and credit score.

So why is PMI worth it?

It lets you buy a home sooner without having to save up a 20% down payment. Think of it as the trade-off for getting into your home now instead of years down the road.

But here’s the good news: PMI isn’t forever. Once you’ve built up 20% equity in your home, you can usually ask to have it removed. This is up to the servicer of your loan (company you make your payments to).  By law, the lender must remove the PMI at 22% equity based off your original purchase price for conventional loans as long as your payments are on time.

PMI is an extra cost, but it’s also a steppingstone to homeownership for many buyers.

Wings also has a few programs that help you avoid the PMI on a conventional ARM (Adjustable-Rate Mortgage) product with less than 20% down.  If you’d like to learn more about PMI and our No-PMI options, please reach out!


Article by:
Kelly Gut
Community Mortgage Loan Consultant
Wings Mortgage, NMLS #1732503
Phone: (952) 997-8091
Apply with Kelly
 

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