What Is Private Mortgage Insurance and Do I Need It? 

Click Here To Watch Our PMI Video: https://youtu.be/cQPsJoDQbxg

Conventional mortgages require homebuyers to pay a 20% down payment on a home purchase. The purpose of this is to ensure that the homebuyer is financially committed to the house, lowering the lender’s risk that the homebuyer may default. According to Redfin, a national real estate brokerage, the median sales price for a Florida home is $400,200[1]. To make a 20% down payment, you would need to save slightly more than $80,000. That is no easy feat. To help buyers who are unable to save such a large down payment, mortgage originators lend money with down payments as low as 3% if the homeowners purchase private mortgage insurance.

Private mortgage insurance (abbreviated as PMI) is a type of insurance that home buyers purchase to protect the lender against default. You don’t need to worry about finding an insurance company for it though – the bank takes care of that for you. If you stop making your mortgage payments, PMI will continue to pay them to the lender. It’s important to note that PMI only protects the lender. If you default on your mortgage, you will still be subject to foreclosure, even with PMI.

Most homebuyers pay for PMI as part of their monthly mortgage costs. The monthly premium for PMI is listed in your mortgage documents, and this amount, as well as the principal, interest, and any escrow for taxes or homeowners insurance are all added together to create your monthly mortgage payment. Another option for paying for PMI is paying an upfront premium at closing. This lowers your monthly mortgage payment, but has two drawbacks:

1. If you sell or refinance your home, you may or may not receive a refund of your pre-paid premium.
2. If you have extra cash that you can put toward paying the premium at closing, you may be better off using those funds for a larger down payment instead.

The third option for paying your PMI premium is a combination of an upfront payment and a smaller monthly payment. Your Choice Mortgage Group loan originator will explain all of the options and the pros and cons of each based on the specifics of your situation.

You will need to pay your PMI premium until you own at least 20% equity in your home. At that point, you can contact the lender to cancel your PMI policy.

To learn more about PMI, as well as different mortgage options for funding your new home, contact Choice Mortgage Group today. One of our experienced and knowledgeable loan originators can provide you with customized information based on the specifics of your situation.

Since 1995, Choice Mortgage Group has been providing homeowners with the best real estate financing programs available. As a licensed lender, we offer a wide variety of services and programs that satisfy the unique needs of each of our clients.

Specializing in residential mortgage lending for over 25 years, our programs include conventional and government lending, purchases, and refinances. We also offer portfolio lending for self-employed borrowers and borrowers with complicated tax situations. South Florida is where Choice Mortgage Group started, and we like to call it home. We are devoted Florida Atlantic University Owls fans and are proud to be the official mortgage lender of FAU Athletics. We also support numerous other local organizations. For more information about Choice Mortgage Group, visit www.choicemortgage.com.

Choice Mortgage Group

2424 N Federal Hwy, Suite 100

Boca Raton, FL 33431

(561) 395-6900

info@choicemortgage.com

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[1] Redfin. Florida Housing Market: House Prices & Trends | Redfin. Accessed September 2, 2022.