Is Private Mortgage Insurance a Bad Thing?
As we have mentioned in a previous blog post, private mortgage insurance (PMI) is very similar to property insurance. However, instead of protecting the homeowner against damage done to their property, PMI protects lenders from the risk of borrowers defaulting on a loan. Unfortunately, there is a common stigma that PMI does not help borrowers and it should be avoided at all costs.
We are here to tell you that PMI is not a bad thing. In fact, you can use it to your advantage depending on your unique financial or home-buying situation.
Increase Your Buying Power
What does your dream home look like? Does it fall within your existing down payment plan and budget? If you cannot afford a 20% equity option for your first (or next) home purchase, PMI may be able to help you afford your dream home without the hefty down payment. You can put less money down and purchase a more expensive home. However, before moving forward with this decision, it’s important to determine whether or not you can comfortably afford the monthly payments.
Get in Your New Home Faster
Saving for a 20% down payment on a home is no simple task. It requires that you adjust your spending and saving habits in order to build a sizeable purse. Unfortunately, time is not always on our side. We sometimes have to move quickly in order to get into a new home. If you do not have the cash readily accessible to put down 20%, but have the financial stability to manage a slightly higher monthly payment, moving forward with the mortgage process and including PMI might be your best option.
Take Advantage of Lender Paid Mortgage Insurance
If you do not have access to a down payment fund that will help you reach 20% equity in the home, lender paid mortgage insurance (LPMI) is an excellent option to explore. With LPMI, the lender agrees to pay your mortgage insurance in exchange for a small increase in your interest rate. This option will help keep your monthly payment low while providing the option to refinance into a regular 80% LTV mortgage loan once you reach 20% equity. If you’re interested in learning more about LPMI, talk to a Ross Mortgage loan officer today to take advantage if this special program.
If you’re still confused about PMI and whether or not it’s good for your situation, give Ross Mortgage a call. We can help you find the right mortgage options (with or without PMI) for your situation.