If you’re buying a home for sale in Lakewood or Long Beach with less than 20 percent down, you’re more than likely going to have to pay for private mortgage insurance, or PMI.
But what is private mortgage insurance, how much does it cost, and how will you pay it? Here’s what you need to know.
What is Private Mortgage Insurance?
Private mortgage insurance is a type of insurance that most lenders will require you to buy if you have less than 20 percent equity in your home. (That 20 percent usually comes from a down payment.) It’s designed to protect the lender - not you - and it works by reimbursing the lender if you default on your mortgage payments. That way, the lender still gets some of its money back.
How Long Do You Have to Pay PMI?
You typically pay for PMI until you’ve built 20 percent equity in your home. How long that takes depends on how much money you pay each month with your mortgage payments.
Is There a Way Out of PMI?
Usually, lenders require you to buy PMI when you have less than 20 percent equity in your home. There is one instance in which you don’t have to buy it, though: When you’re using a VA loan or some other types of government-backed loans. If you’re using a VA loan or another type of government-backed loan, you can put little or nothing down on a home and lenders won’t require it. (This doesn’t apply to all government-backed loans, though.)
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