Let’s talk PMI- or Personal Mortgage Insurance. If you’ve purchased a home before, you may have heard this term before, but chances are you’re not completely familiar with all the aspects of what it is, what it means, and what it does.
What is PMI?
In short, PMI allows you to finance a home with less than a 20% down payment. For an extra monthly cost to you, PMI provides default insurance to the lender, rather than waiting until you’ve saved tens of thousands of dollars that would otherwise be necessary to come up with a full 20% down payment.
Considering Your Options
You might consider taking the time to save a greater down payment to avoid the monthly expense of PMI. It’s important to weigh the benefits of each option, depending on how long it takes you to save the necessary amount, and other unforeseen life circumstances that can arise, ultimately depleting your savings efforts. While it’s your choice which direction you choose to go, generally, delaying a purchase while rates and prices rise may be more costly than PMI in the long run.
When In Doubt, Ask Your Loan Officer
To summarize, PMI allows you to buy what you want now vs what could end up being far less of a home after you’ve managed to save a larger down payment later.
Your loan officer can explain your options regarding PMI more in depth once they’ve reviewed your loan application.