Understanding Private Mortgage Insurance

Private Mortgage Insurance, commonly known as PMI, is an insurance policy that allows lenders to provide mortgage loans to borrowers with less savings available for a down payment. PMI provides a safety net for the lender by covering a portion of the loan if the borrower fails to make payments. This insurance makes it possible for more people to qualify for home loans, even if they haven't saved up a large down payment.

PMI is typically required if you are purchasing a home with a conventional mortgage loan and your down payment is less than 20 percent of the purchase price, or if you are refinancing your mortgage and have less than 20 percent equity in your home. Payments are usually included as part of your monthly mortgage payment. The cost can vary depending on the borrower's credit history, debt-to-income ratio (DTI), and loan-to-value ratio (LTV). You can avoid paying for PMI by making a down payment of at least 20 percent when purchasing a home. Some lenders may offer loan programs that do not require PMI but may come with higher interest rates. It's important to weigh the costs and benefits of these options to determine what works best for your financial situation.

Private Mortgage Insurance benefits consumers by enabling more people to achieve homeownership with smaller down payments. While it adds to the cost of your mortgage, it also provides an opportunity to buy a home sooner rather than later.

If you have any questions about PMI or need assistance with your mortgage, please reach out to one of our experienced home lenders, or call your branch location. We are here to help you navigate the complexities of mortgage lending and find the best solutions for your needs.