What is PMI?

What is PMI? This is a question I get all the time. PMI is Private Mortgage Insurance. What that is, is insurance policies that protect the lender, not you. But guess who has to pay the premium? You! I know, that is ridiculous, but it's what happens when you don't put 20% down on a house. So, if you put 5% down, 10% down, 3.5% of your FHA, you will pay PMI.

Now, sometimes when you pay PMI, the interest rate becomes smaller, and so your payment actually balances out. So, sometimes it's to your monthly advantage to pay PMI. Where it becomes difficult, though, is that it never goes away on an FHA. You're always going to pay that PMI. If you have a conventional loan, a loan not backed by the way that the government does it with the FHA, once you hit that 80% to 20% loan-to-value, where you owe 80% and you have 20% equity, they take the PMI off. So, your payment goes substantially down, $100-$200 a month typically.

So, you want to make sure you ask the question "Is the PMI in there forever?" "Is it in my favor?" and "Who does it protect?" Well, there's the scoop! Edna Wilson, your Hometown Realtor, as Hometown as Apple Pie!