Between mortgage rates, homeowners insurance and property taxes, there’s a lot to think about if you’re buying a home in Berks County. Another financial responsibility that you shouldn’t forget is private mortgage insurance, or PMI. Many people are confused about what this insurance is and how it works, and some may unsure if they’ll need to purchase it for their Mortgage Berks County PA. Keep reading to learn more about private mortgage insurance, or Click Here to contact the experts at Perfetto Insurance Company for answers to more in-depth questions.
What’s the difference between homeowners insurance and PMI?
Homeowners insurance is designed to protect both you and your money lender in the event your home sustains damage or loss. PMI, on the other hand, is a type of insurance that protects your financial lender in case you default on your loan.
Do I have to have private mortgage insurance?
Typically, you’ll be required by law to purchase private mortgage insurance if your down payment on your home is less than 20%. Circumstances may vary, but PMI is usually a necessary part of a conventional private loan secured with a smaller down payment. If you have a loan through a government agency like the FHA, your mortgage insurance requirements may differ slightly.
How long will I need to pay private mortgage insurance?
You’ll need to pay monthly payments on private mortgage insurance until the loan-to-value ratio (LTV) on your home reaches 80%. Divide the amount of your loan by the current value of your property to figure this value.
Are there ways to lower the cost of PMI?
Usually, a higher down payment on your home and a higher credit score will result in lower premiums. If you have an excellent credit rating and put at least 20% down on your home, you can avoid purchasing insurance for your Mortgage Berks County PA altogether.
Does PMI benefit the homeowner or just the lender?
Without mortgage insurance, many families with less-than-perfect credit or smaller down payments would be unable to afford purchasing a home. PMI safeguards the interests of financial lenders, making it more likely that they’ll give mortgage loans to “higher-risk” customers.
Private mortgage insurance can be a confusing financial obligation, but it may be a necessary expense if you’re purchasing your first home or your financial situation is less-than-perfect. If you have more questions, don’t hesitate to contact an insurance professional.