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Home Buying Terminology -- What s PMI?
Private Mortgage Insurance, or PMI, is required on most mortgages with a loan-to-value ratio of 80% or more. In other words, if you put less than 20% down when buying a home, you will probably have to pay PMI.
A third-party insurer provides PMI to protect the mortgage lender. This is a critical point. Many homebuyers think PMI is designed to somehow protect them, but this is not the case. PMI protects the lender in case you default on your loan.
The only way PMI benefits a buyer is by helping them qualify for a loan in the first place. Beyond that, PMI does nothing for the homebuyer is merely one more thing to pay each month (normally half a percent of the loan amount).[ Read Article ]
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