PMI

Private Mortgage Insurance (PMI) is a type of coverage you buy if you get a conventional mortgage (one that isn’t federally guaranteed) and put down less than 20% to purchase a home or have less than 20% equity when refinancing. Here are the key points about PMI:

• PMI protects the lender, not the borrower.
• It covers the lender in case you default on the home loan.
• The lender requires PMI because it is assuming additional risk by accepting a lower amount of upfront money toward the purchase.

• Usually, you pay for PMI monthly as part of your mortgage payment.
• The average annual cost of PMI typically ranges from 0.46% to 1.5% of the loan amount, depending on your credit score.
• Borrowers with excellent credit get the lowest PMI rates.
• For a $289,500 mortgage (assuming a 3.5% down payment), PMI could cost anywhere from around $1,332 to $4,343 per year, or about $111 to $362 per month1.

  You can avoid PMI by making a 20% down payment.

• Other types of loans (such as FHA, VA, and USDA) have different       insurance requirements and costs.

Remember, PMI is a way for lenders to mitigate risk, but it’s an additional cost for borrowers. As you explore mortgage options, understanding PMI helps you make informed decisions about your home purchase or refinance.