When it comes to buying a home, whether it is your first time or your fifth, it is always important to know all the facts. With the large number of mortgage programs available that allow buyers to purchase a home with a down payment below 20%, you can never have too much information about Private Mortgage Insurance (PMI).
What is PMI?
“An insurance policy that protects the lender if you are unable to pay your mortgage. It's a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.Once you've built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down paymentfor all buyers last year was 10%. For first-time buyers, that number dropped to 6%, while repeat buyers put down 14% (no doubt aided by the sale of their home). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.
Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:
The larger the down payment you can make, the lower your monthly housing cost will be, but you need to remember:“It's no doubt an added cost, but it's enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment,let's talk so I can explain the market’s conditions and help you make the best decision for you and your family.
Tim Kelley was born and raised in Colorado and has been involved in Real Estate for over 12 years. From helping buyers find the right property to call home, to helping seller's get top value for their homes, Tim's drive is to become his clients' life long Real Estate Advisor. Tim specializes in the Denver, Littleton, Englewood, Aurora, Cherry Hills, Centennial and Greenwood Village areas.
If you are thinking about selling your home or buying a new one, give me a call today at 303.999.7299 for a complimentary consultation or a free market analysis. I look forward to meeting you in person.
Author:Tim Kelley Phone: 303-999-7299 Dated: May 19th 2017 Views: 5 About Tim: ...
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