PRIVATE MORTGAGE INSURANCE (PMI)

Private Mortgage Insurance (PMI)

Private Mortgage Insurance (PMI) is a type of insurance that protects lenders in case a borrower defaults on their mortgage payments. It is typically required for borrowers who make a down payment of less than 20% on their home purchase. PMI allows borrowers to secure a mortgage even if they don't have a substantial down payment, but it does come with additional costs.

Meaning of Private Mortgage Insurance

Private Mortgage Insurance, commonly called PMI, is an insurance policy that safeguards lenders in the event of borrower default. It provides financial protection to the lender, allowing them to recover a portion of the outstanding mortgage balance if the borrower fails to make payments. PMI is typically required when the down payment is less than 20% of the home's purchase price.

Click & Learn

First-Time Homebuyer

Interest Rates

Hard To Qualify For

Buying A Modest Home

Super High Loan Minimum

First-Time Homebuyer

Risk Factor

You cannot get a jumbo loan as a first-time homebuyer.

Solution

But this is not the case. Even if you are buying your first home, you can apply for a jumbo loan. And you may be successful depending on your credentials.

Interest Rates

Risk Factor

You will pay a higher interest rate on a jumbo loan.

Solution

DSCR loan interest rates are comparable to conforming loans.

Hard To Qualify For

Risk Factor

Jumbo loans are hard to qualify for.

Solution

Jumbo loans are a bit more difficult to qualify for but not by very much as a credit score of 720 is fairly easy to achieve.

Buying A Modest Home

Risk Factor

You do not need a jumbo loan if you are not buying a mansion.

Solution

It is not uncommon for regular homes to require more financing to buy than you can obtain through the use of a conforming mortgage.

Super High Loan Minimum

Risk Factor

Jumbo loans require a super high loan minimum.

Solution

Jumbo loans don’t start at $1 million dollars. Instead, the minimum amount for a jumbo loan is anything above the conforming loan limit of $647,200.

Factors Affecting Private Mortgage Insurance

Several factors influence the cost of PMI and the duration for which it is required:

Loan-to-Value Ratio (LTV): A higher LTV ratio, resulting from a smaller down payment, generally increases the PMI premium.
Credit Score: Borrowers with a lower credit score may face higher PMI rates, as it is perceived as a higher risk for the lender.
Loan Program: Different loan programs may have varying PMI requirements and rates. FHA loans, for example, have their mortgage insurance known as MIP (Mortgage Insurance Premium).
Property Type: Certain property types, such as investment properties or condos, may have different PMI requirements.
Loan Term: The length of the loan may affect the PMI duration and cost.

Pros of Private Mortgage Insurance

Access to Homeownership: PMI allows borrowers to purchase a home with a down payment of less than 20%.
Loan Approval: PMI can increase the likelihood of loan approval, even for borrowers with limited upfront funds.
Flexible Payments: PMI payments are often included in the monthly mortgage payment, making it convenient for borrowers.

Hero Mortgage

We bring a customized, unique approach to mortgages. Our lending solutions use the perfect hybrid of human-driven insights and technical prowess to process loans faster and significantly reduce costs.

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(479) 250-4485

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PRIVATE MORTGAGE INSURANCE (PMI)