Do I Really Need Private Mortgage Insurance (PMI)?
Not necessarily does every home buyer need to purchase PMI. It will depend on whether your own lender requires it or not. This is decided by the Loan to Value ratio aka down payment. Lenders love to tack on PMI as it increases their bottom line and it coast you more money. Likewise, it is very difficult to remove from your loan.
What is PMI?
Private mortgage insurance is strictly for the benefit of your lender. It protects the lender in case you default on your mortgage. This is the main reason why the loan to value ratio is so important. The lower the down payment the higher the risk for the lender The lender makes the borrower pay for it monthly and is virtually impossible to remove. The borrowers usually has to refinance their loan in order to remove PMI. Almost any lender demands PMI when the borrowers’ down payment is less than 20%.
The sad part, from a consumer’s standpoint, is PMI is not tax-deductible. It’s a financial lose-lose for the borrows and a win-win for the lender.
What should I do?
If at all possible it’s better to put 20% down when buying a home and seeking conventional financing. Not all lenders require PMI so it would be prudent to shop around and find a lender who doesn’t require it.
Another avenue would to be…whatever the difference from what money you may have as a down payment and 20% is to find a source to cover the difference in a form of a Note and Deed of Trust. There are a number of people who would love to do that especially if they know you.
What to do next?
Here’s an easy 3-step process that will help you understand PMI.
Take out your cell phone
Look up my number
Call or email Cliff Keith and Team for more details: 650-346-7366 or Cliff@SFBayHomes.com
When you call I will answer any of your questions to the best of my knowledge. Putting my 40 years of experience to work for you would be a benefit and you can well imagine. Cliff Keith and Team is a company who prides themselves on being a resource for home-buyers. We are interested in help our clients have a world class experience and earn the right to have them for a client for life.
Please call today you will be glad you did.
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