Private Mortgage Insurance

What is PMI? It is a financial instrument that can be used by homebuyers, usually first time homebuyers, when they have a down payment that is less than 20% required by the lenders. With this type of insurance, it enables a homebuyer to by a home with as little as 3-5% down. So, basically, it is a safety net which protects the lender from a loss if the homebuyer is to default on the loan.

In order to understand the details of PMI it is important to understand the motivation of lenders. Lenders are in a business to make money. This insurance helps to protect them, not you. The only thing you get will be a lighter purse, and that beautiful home that you could not have afford without PMI (because you only had 3-5% to put down).

Lenders will typically provide you with all the information on PMI as well as secure it for you. Homebuyers will need to continue to make PMI payments until they have reached the 80% of the original selling price or the appraised value of your home at the time the loan was obtained.

The Homeowners Protection Act (HPA) was passed in 1998 and it contains a number of provisions to protect the interests of the borrowers. The main provision is the automatic termination of the policy, when the borrower pays down their mortgage to 78% of the value, if you are current on your loan-meaning that you have not been 30 days late with a payment.

If you would like more information on PMI and how it can help you get into that desired home, let me know and I can recommend to you a qualified lender.

Call Cheryl Cahill, Cross Real Estate, 508-369-3809 or at ccahillrealtor@hotmail.com