How much is PMI in Texas? Are you trying to secure a mortgage for a new home? Can you only afford to make a small down payment? Private mortgage insurance might be the key for you to buy the house you want right now. If you apply for a home mortgage, your lender will require that you provide a down payment equal to 20% of the property’s purchase price. If you can’t afford that, your lender will not approve a mortgage for you because it would be a very risky investment. Your lender will require that you purchase private mortgage insurance if your down payment is less than 20% of the purchase price.
What is private mortgage insurance?
Private mortgage insurance, or PMI, will protect your mortgage lender in the case that you default on your mortgage loan. That is, if you stop making the payments on your mortgage loan for any reason, the PMI will cover the loss for the lender. Homebuyers are usually required to get PMI if their down payment is less than 20% on a conventional mortgage loan; it is arranged by your lender and provided by private insurance companies. (Note: if you need to refinance with a conventional loan and your home equity is less than 20% of the value of your home, your lender also will require you to get PMI.)
Making PMI payments
There are several ways to pay for PMI. Before you get a mortgage, you should ask your lender what payment options they have to offer. The most common way to pay for PMI is a monthly premium, added to your mortgage payments. Another way to pay for PMI is with a one-time, up-front premium, paid when you close on the house. (Note: if you make an up-front premium payment and then move or refinance your home, you may not be entitled to a refund of that premium; you should clarify this with your lender.) Sometimes there is an option to pay with a combination of monthly premiums and the up-front premium. Also, important to note is that sometimes lenders offer more than one option for paying PMI. Ask your loan officer to help you calculate the total PMI costs for a few different timeframes before so you can choose the payment option that is best for you.
PMI can help you qualify for a mortgage when your down payment is smaller than what your lender requires. Even though it may increase the cost of your loan in the long-run, PMI can help you to become a homeowner more easily by reducing your lender’s risk of issuing a mortgage to you.
If you are thinking about purchasing a new home and have questions about securing a mortgage, WEICHERT, REALTORS® – The Harrell Group is ready to help you! The knowledgeable real estate team based in the Flower Mound suburb of the Dallas-Fort Worth Metroplex will provide professional guidance and support so you can purchase the new home that is perfect for you and your family. Contact WEICHERT, REALTORS® – The Harrell Group to speak to a licensed real estate agent about your mortgage options and private mortgage insurance.
Written by: Erika Mehlhaff