Ready to buy a home but aren’t prepared to make a 20% down payment? Don’t worry, you can still get a mortgage without having to put down 20%, but you might have to pay PMI to do so. Here’s everything you need to know about PMI (private mortgage insurance) and what it means for your mortgage options.
What is PMI on a mortgage?
Private mortgage insurance (PMI) is a fee that borrowers are typically required to pay on a conventional loan if they make a down payment that is less than 20% of the home’s purchase price. Paying PMI can help you make a lower down payment, however it is an added cost to your monthly mortgage payment. So, if you plan to put less than 20% down, be sure to budget accordingly for the PMI fee.
How to remove PMI from a mortgage?
If you’ve found yourself paying PMI on a mortgage and wondering when the day will come that you don’t have to pay it anymore then I have good news for you—PMI isn’t permanent. Once you have built up 20% of equity in your home, you can contact your loan officer and request your PMI be cancelled. Another option is to pay down your mortgage sooner. Using a free extra payment calculator can help you understand how much you could save by making more frequent mortgage payments.
Mortgages with no PMI
Another option for not paying PMI is to find a mortgage that doesn’t require it at all. PrimeLending is proud to be a lender that offers no PMI mortgage options. The most common loans with no PMI fee are government-backed loans.
FHA loans – Backed by the Federal Housing Administration (FHA), this loan requires as little as 3.5% down and offers other benefits like flexible income and credit requirements as well as lower closing costs. While FHA loans do not require PMI, FHA loan borrowers are required to pay a mortgage insurance premium (MIP) instead.
VA loans – Backed by the United States Department of Veterans Affairs (VA), this loan allows active-duty military members, veterans, and qualified spouses finance their homes without making a down payment* or paying PMI.
Working with a lender that can help you understand PMI and all things mortgage is a key to a positive mortgage process. Find your local PrimeLending loan officer today to start your journey home.
*Down payment waiver is based on VA eligibility.
