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You Can Never Have TMI About PMI
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 a home with a down payment below 20%, you can never have Too Much Information (TMI) about Private Mortgage Insurance (PMI).
What is Private Mortgage Insurance (PMI)?
Freddie Mac defines PMI as:
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 6%, while repeat buyers put down 14% (no doubt aided by the sale of their home). 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:
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 to help you make the best decision for you and your family.