Making Sense of Mortgage Insurance
Mortgage Insurance, also referred to as PMI, makes buying your first home possible when you do not have a big down payment.
What is PMI (and MIP)? Mortgage Insurance Protects the lender if you cannot repay your mortgage. If you have a low down payment, the lender wants to cover their risk with insurance. PMI Stands for Private Mortgage Insurance and applies to Conventional loans.
When will I need mortgage insurance? Well, that depends. If you are putting less than 20% down on a Conventional Loan, mortgage insurance is applied. FHA Loans always require PMI no matter how much of a down payment you put. VA Loans have no PMI or MIP.
How much does mortgage insurance cost? A couple thousand dollars a year is typical, spread across monthly payments. MIP and PMI is included in your monthly mortgage payment. It can be higher or lower depending on the size of your down payment, your credit score and the size of your loan.
Can PMI go up? No, once your mortgage is finalized, your PMI and MIP cannot increase.
Can I pay the whole thing up front and be done with it? Yes, sometimes you can, if you get a conventional loan.
Can I avoid mortgage insurance? Probably not, but maybe if you can get into one of a few special loan programs or put 20% or more down on your conventional loan.
Still unsure? Contact one of our Mortgage Loan Advisors today for a Free Consultation.
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MIP is a version of Mortgage Insurance that is required for some government backed loans