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What Is Private Mortgage Insurance (PMI)?





What Is Private Mortgage Insurance (PMI)? | MyKCM
When it comes to buying a home, whether it is your first time or your fifth, it is always
important to know all the facts. With the large number of mortgage programs available
that allow buyers to purchase homes with down payments below 20%, you can never
have too much information about Private Mortgage Insurance (PMI).
What is PMI?
Freddie Mac defines PMI as:

An Insurance policy that protects the lender if you are unable to pay your mortgage.

 Its a monthly fee, rolled into your mortgage payment, that is required for all conforming, 
conventional loans that have down payments less than 20%.

 Once you have builtequity of 20% in your home, you can cancel your PMI and remove 
that expense from your mortgage payment. 
 As the borrowe, you pay the monthly premiums for the insurance policy, and the lender is
the beneficiary,  Freddie Mac goes on to explain that:

The cost of PMI varies based on your loan-to-value ratio-- the amount you owe on your
 mortgage compared to its value -- and credit score, but you can expect to pay between $30 
and $70 for every $ 100,000 borrowed.

 According to the National Association of Realtors, the average downpayment for all buyers
 last year was 10%. For first-time buyers, that number dropped to 5%, while repeat buyers
put down 14% (no doubt aided by the sale of their homes). This just goes to show that for
a large  number of buyers last year, PMI did not stop them from buying their dream homes.

Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment
& PMI, compared to a 20% down payment without PMI:

 The larger the down payment you can make, the lower your monthly housing cost will be,

 but Freddie Mac urges you to remember:

What Is Private Mortgage Insurance (PMI)? | MyKCM

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Bottom Line

If you have questions about whether you should buy now or wait until you’ve saved a larger
down payment, let’s get together to discuss our market’s conditions and help you make the
best decision for you and your family.


The information contained, and the opinions expressed, in this article are not intended to be
 construed as investment advice. Keeping Current Matters, Inc. does not guarantee or 
warrant the accuracy or completeness of the information or opinions contained herein.
 Nothing herein should be construed as investment advice. You should always conduct your 
own research and due diligence and obtain professional advice before making any investment 
decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by
 your reliance on the information or opinions contained herein.
Contact me
Asifa Zia
Pearson Smith Realty
Licensed in Commonwealth of Virginia. 
540-729-3470
aszia09@gmail.com
buyandsellnorthvirginia.com

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