Private mortgage insurance, or PMI, is insurance that buyers may be required to obtain. PMI is usually required on a conventional loan if the down payment is less than 20% of the home's purchase price.
PMI serves as a safeguard for lenders in case borrowers default on their mortgage payments. It provides protection by covering a portion of the lender's losses if the loan goes into foreclosure. While PMI benefits the lender, it allows buyers to purchase a home with a lower down payment, making homeownership more accessible.
It's important to note that PMI is an additional cost that borrowers must factor into their monthly mortgage payments. The specific amount of PMI can vary based on factors such as loan amount, credit score, and down payment percentage.
However, as you make mortgage payments and build equity in your home, there may be opportunities to cancel or remove PMI once you reach a certain level of equity.
Contact us today to connect with a knowledgeable loan officer who can provide valuable insights into PMI requirements and help you make informed decisions that align with your financial goals.
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