"Private mortgage insurance (PMI) protects lenders if borrowers default, with costs based on loan amount; crucial for homebuyers with less than 20% down."
"PMI is mandatory for down payments under 20%, adding an extra monthly payment. Homebuyers should budget accordingly to avoid surprises."
Private mortgage insurance (PMI) is a crucial but often overlooked expense for first-time homebuyers putting less than 20% down on a home. PMI protects lenders against default and is added to monthly mortgage payments. Typically, PMI costs between 0.5% and 1.5% of the loan amount annually, which can be a significant expense over time. Homebuyers should aim to pay off 20% equity to eliminate PMI, which lenders are not required to cancel until 22%. Understanding PMI calculations and implications is essential to avoid unexpected costs.
Read at Redfin | Real Estate Tips for Home Buying, Selling & More
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