What Is PMI?

What is PMI? Could private mortgage insurance be your solution to equity and down payment problems?

What Is PMI - Friend Or Foe?

For years banks required a 20% down payment from home buyers. But when home prices began to rise, saving a down payment became harder.

Case in point, 20% of a $300,000 house equals a $60,000 down payment. No surprise, this can be a struggle especially for first time home buyers.

Just the opposite, real estate values drop from time to time and homes lose value. Overnight, homeowners can end up with insufficient equity to refinance. But with the backing of mortgage insurance, lenders can approve refinancing with less than 20% equity.

In short, mortgage insurance can help home buying and refinancing.

Who Does Private Mortgage Insurance Insure?

PMI insures mortgage lenders against losses incurred when borrowers are unable to make their monthly house payments. PMI does not insure homeowners.

What Will PMI NOT Insure?

As previously stated, PMI insures mortgage lenders. It is not life insurance and does not cover monthly house payments in the event of job loss or death.

Why Does My Home Mortgage Require PMI?

PMI helps homeowners with less than 20% equity. It assists refinances after the loss of equity. Mortgage insurance also befriends home buyers with less than 20% for a down payment.

When Is My Private Mortgage Insurance Due?

Generally, PMI is included in monthly house payments. Ask your lender about alternative upfront lump sum payments or lender-paid insurance, sometimes called lender self-insuring.

Who Is Responsible For Mortgage Insurance Set Up?

During the home mortgage process, the lender applies for the PMI approval on behalf of the borrower.

How Is PMI Approval Determined?

In part, PMI approval and cost is based on equity or down payment, credit history, occupancy status, loan type and size of the home mortgage.

Is PMI The Same As FHA Mortgage Insurance?

PMI comes from private companies. It is purchased by lenders and charged to borrowers. It insures conventional loans.

In the case of FHA, borrowers usually pay a monthly fee and finance a lump sum, depending on the FHA program. Both amounts go into a federal account to insure lenders against borrower's default on FHA mortgage loans.

How Is The Cost Of PMI Calculated?

Is it a one-size-fits-all amount or does the cost vary? You can find the answer at How Lenders Calculate PMI.

Can I Ever Get Rid Of PMI?

Traditionally, home buyers have been opposed to PMI since it was tedious to cancel. In 1998, PMI laws changed helping qualified homeowners get rid of PMI under the guidance of The Homeowner's Protection Act.

Discover how lenders calculate PMI removal and when you could need a current appraisal at How Do I Cancel PMI?

Ask Kate To Translate Private Mortgage Insurance

Ask Kate

What if you could ask a mortgage insider anything you wanted regarding PMI decision making? Now you can.

Ask Kate is specifically designed to answer your questions and create dialog regarding mortgage solutions.

What Do You Want To Do Next?

Discover the question inspiring this page PMI Calculation Questions.

You might not know this but you could be entitled to a mortgage insurance refund from FHA.

For home buying help, visit Discover The Magic Of Buying A House.

Refinancing help is found at Refinancing Advice - Nuts And Bolts.

A Reader asks for PMI Refinancing Advice here.

Search Readers' questions and Kate's answers at Paying Private Mortgage Insurance.

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