VIDEO: What Is Private Mortgage Insurance (PMI)?
There can be many confusing topics when it comes to buying a house, and PMI, known officially as Private Mortgage Insurance, might be one of them for you. Honor Credit Union mortgage lender Nita Snyder explains in the video below what PMI is, why it exists, and how it affects new home buyers and current homeowners looking to refinance.
What Is It?
Private Mortgage Insurance, also known as PMI, is an insurance that lenders will typically get if you’re buying a home with less than 20 percent down payment, or if you’re doing a mortgage refinance and there’s less than 80 percent equity in the home.
The mortgage insurance is typically included in the monthly payment so it’s not an extra payment to worry about.
Private Mortgage Insurance ultimately protects the credit union or bank. It’s riskier for the lender if you’re not able to make a down payment, or if you’re making a smaller down payment on a purchase. Similarly, with a refinance, it’s risky for the lender if you don’t have enough equity built up in your home.
With the risk, lenders need to be able to recoup some of the money if for some reason a borrower doesn’t make their payments, or goes into foreclosure.
Are There Options To Avoid PMI?
Yes. Honor Credit Union has options that could allow you to avoid needing Private Mortgage Insurance. We know every situation is different, that’s why we say come tell us your story. We want to meet with you to go over the options, because we might have a solution to fit your situation.