Private mortgage insurance: you’ve heard of it, but what is it? Will you have to pay it, and if you will, how much does it cost?
What is Private Mortgage Insurance?
Private mortgage insurance insures your lender, not you. In many cases, such as when the borrower (you) are putting down less than 20 percent of the home’s sale price as a down payment, lenders actually require private mortgage insurance.
Look at it this way: a lender considers you riskier if you put down less than 20 percent of the home’s sale price. Private mortgage insurance protects the lender if you default on your payments. If you put nothing down on a home that costs $200,000, for example, and you fail to make the mortgage payments, the mortgage insurer will give your lender the amount you didn’t pay, up to 20 percent of the home’s sales price.
You don’t get to choose the insurance company you use, and the premiums are non-negotiable.
When Can You Stop Paying PMI?
Once the equity in your home hits 20 percent of the home’s purchase price, you could be eligible to stop paying PMI. You’ll have to call your lender and ask about cancelling.
If you ask to cancel your PMI, your lender will want proof that you have a secure equity position and that your equity is at least 20 percent, which means they’ll ask you to pay for an independent appraisal. You can’t choose your appraiser, and you can’t price-shop appraisers, either. Typically, you can expect to pay between $300 and $500 for this appraisal.
Are You Looking for a New Home in Grand Junction or the Surrounding Communities?
If you’re looking for a new home in Grand Junction, Fruita, or any of the surrounding communities, we’d love to help you find it.
Call us at 970-765-4135 or get in touch with us online. Tell us what you want from your next home and we’ll start looking right away.
In the meantime, please feel free to explore our Grand Junction real estate listings by price:
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- Grand Junction, CO real estate listings over $1 million