What is PMI?
Posted by: raindrop 7 years, 9 months ago
PMI, or Private Mortgage Insurance, is typically a lender requirement when a prospective Buyer’s down-payment is less than 20% of the appraised value, or asking price, of the home.
Most homebuyers need PMI because 20% of a sale price is a lot of money, especially in a market like Coronado and San Diego. From the lender’s perspective PMI is extra insurance to help protect the lender if borrower were to default on the loan, or walks away from the loan.
PMI typically charges a half percent of the total loan. For example, let's say you put down 10% on a $100,000 home, so your down-payment is $10,000 and your loan would be $90,000. The lender multiplies the $90,000 loan by .005. The PMI is an annual payment of $450, which can be divided into monthly payments of $37.50.
Homebuyers who obtained a loan on or after July 20,1999 are protected by the Homeowner's Protection Act. Under the HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80% of the original purchase price, or appraised value of your home at the time the loan was obtained, whichever is less.
If you have any questions regarding PMI, or any other inquiries, please feel free to contact us at (619)435-0145.
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