First-Time Buyer Guide: Understanding PMI and How It Affects Your Mortgage
Buying your first home is exciting, but it also comes with financial terms that can feel overwhelming. One of the most common costs many buyers encounter is Private Mortgage Insurance, commonly known as PMI. If you're purchasing a home with a smaller down payment, understanding PMI can help you budget wisely and avoid surprises during the mortgage process.
What Is PMI?
Private Mortgage Insurance is coverage that protects the mortgage lender if a borrower is unable to repay their home loan. PMI is usually required when a buyer puts down less than 20% of the home's purchase price.
Lenders see loans with smaller down payments as higher risk. PMI reduces that risk and allows more buyers to qualify for financing, even if they don't have a large amount saved for a down payment.
Important to Know: PMI Protects the Lender
A common misunderstanding is that PMI protects the homeowner. In reality, PMI only protects the lender. If a borro...
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