When you are buying a house, you will have plenty of details on your mind day after day during the process. While it may not be at the top of your list, private mortgage insurance is something that should not be overlooked. As you maneuver your way through the homebuying process, knowing all you can about private mortgage insurance can be very important. Because of this, here are some of the most important aspects of this unique insurance.
You Can Avoid It
If you play your financial cards correctly, you may not need to purchase private mortgage insurance. But to do so, you will need to pay a substantial down payment on your home, usually at least 20% of the total price. However, since this is hard for many homebuyers to do, most people do purchase private mortgage insurance.
Your Credit Score Is a Factor
When getting this type of insurance, your credit score can be a factor in determining how much your PMI will cost. If you have a high credit score, you are viewed by a lender as someone who is at low risk of not meeting their financial obligations. Thus, you may be able to qualify for PMI that will cost you less than a homebuyer with marginal credit. Find a professional, like those at AJM Mortgage Inc for help with better understanding your credit score and what it means.
How Do You Pay for PMI?
Once you purchase PMI, you will have different ways of paying for it. For example, some homebuyers choose to pay the premium as part of their closing costs, then make one annual payment until it is paid in full. Along with this option, you could choose to have the premium included in your home loan, allowing you to make monthly payments in addition to your house payment. But remember, should you opt for monthly payments, you’ll be paying more in interest over the duration of the loan.
When Do You No Longer Need PMI?
Like many people, you may assume that once you get PMI, it will be with you forever. However, that’s not true. In fact, once you have made enough monthly payments on your house so that you have at least 20% equity in it, your lender is required to cancel the PMI.
Prior to signing on the dotted line for your new home, always find out everything you can about private mortgage insurance regarding its costs, how long you will need it, and much more.