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PMI Q&A

By Amy Patterson

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Many lenders advertise ways for you to avoid PMI, but why? We’re here to cover some questions about PMI, and show you the other side of the debate.

Q. What is PMI?

A. PMI stands for Private Mortgage Insurance. 

Q. Why do I need PMI?

A. Not everyone needs PMI…however, if your mortgage loan exceeds 80% LTV (loan-to-value), you will be required to have PMI. 

Q. Isn’t paying PMI a bad thing?

A. Mortgage insurance isn’t a bad thing. In fact, without mortgage insurance, lenders would not be able to offer programs that only require a 3.5% or 5% down payment. It is because of PMI that lenders are able to offer 100% financing and zero down payment loans, which help a wide array of homebuyers. 

So, basically, were it not for PMI, borrowers might have to put at least 20% down on a new home…which might eliminate the possibility of some individuals becoming homeowners. 

Tags: Mortgage, First Time Home Buyers, Home Loans, Home Sales, Home Buyer, PMI