FHA loans, a popular choice among first-time homebuyers and those with limited financial resources, offer a gateway to homeownership with their distinct advantages. One of their most attractive
What is PMI and Why do you need to it?
Dated: August 18 2023
PMI, or Private Mortgage Insurance, is a type of mortgage insurance that you might be required to pay for if you have a conventional loan. PMI is arranged by the lender and provided by private insurance companies. It protects the lender, not you, in case you stop making payments on your loan.
There are both pros and cons to having PMI. Here are some of the pros:
- Lower Down Payments: PMI allows you to pay less upfront, so you can place an offer for the home you have your eye on, even if you can’t make the 20% down payment up front.
- More Money Now: Since you don’t have to put as much money down upfront, you’ll have more money available to use for other financial goals or investments.
Here are some of the cons:
- Forego opportunity to save/invest: If you choose to pay PMI instead of saving up for a 20% down payment, you may be missing out on the opportunity to save or invest that money instead.
- Additional Cost: PMI is an additional cost that you’ll have to pay on top of your mortgage payment. The cost of PMI can vary, typically between 0.5% and 2.25% of the entire mortgage loan amount annually, depending on factors like the size of the loan and your credit score.
In conclusion, PMI can be a useful tool for homebuyers who are unable to save up for a large down payment. However, it’s important to weigh the pros and cons and consider whether it’s worth the additional cost. Ultimately, the decision will depend on your individual financial situation and goals.
However, many lenders offer low and no down payment loans for eligible buyers, typically first-time buyers with good credit that have low or no PMI. Want to learn more about loans for #firstimehomebuyers Call or text 919.822.9800 today.
With a real estate background since 1996, Ricardo obtained his broker's license in 2015 and excelled in his market by assisting investors. He has become a preferred Realtor in the Raleigh-Cary region ....
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