There are many costs associated with purchasing a home, and sometimes it can get confusing when it comes to understanding the costs that are required when you are trying to get financing. If you are a home buyer looking to get a conventional loan to help you purchase your home, you may be required to obtain private mortgage insurance. If you are a home buyer located in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and have questions about getting a loan and private mortgage insurance, contact Foundation Mortgage today. We can work closely with you to determine your situation, and the best financing option for you.
What Is Private Mortgage Insurance?
Most lenders require private mortgage insurance, (PMI), when a home buyer puts down less than a 20% down payment and obtains a conventional loan. PMI is also typically required when you refinance with a conventional mortgage and have less than 20 percent equity built up in your home value. The purpose of a private mortgage insurance policy is to protect the lender in the event that you are unable to make payments toward your loan. You must pay a monthly premium to an insurer, which goes towards a portion of the balance due to the lender in case of a borrower default. Private mortgage insurance is an added cost, but it does help borrowers qualify for a mortgage who may not normally be able to be eligible for one.
How Much Does Private Mortgage Insurance Cost?
The cost of private mortgage insurance varies, and is based on several factors. First of all, PMI depends on the size of the mortgage you take out; the more money you borrow, the higher your PMI will be. Also, the amount you pay for a down payment determines how much insurance you will pay; the higher your down payment, the less you will have to pay for PMI. Another factor that determines your PMI is your credit score. If you have a higher credit score, your PMI will be less expensive. Lastly, the type of mortgage you obtain can determine how much you will pay for PMI. Private mortgage insurance will be more expensive with an adjustable rate mortgage compared to a fixed rate mortgage. This is because the rate can fluctuate with an adjustable rate and poses a higher risk than a fixed rate, so PMI will more than likely be higher. You can stop paying for mortgage insurance when the balance of your mortgage reaches 78% of the original purchase price if you have made consistent loan payments.
Assistance With Private Mortgage Insurance
If you are currently looking to purchase a home with a conventional mortgage, and would like to know more about the price of private mortgage insurance in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, Foundation Network is here to help. Contact our loan specialists today for a consultation.