f you have ever bought a
home or are considering by To protect the lender’s interests
a home, condo or townhouse, in situations where the down
then you have probably heard the payment is less the 20%, the
term Private Mortgage Insurance lender will usually require a
or PMI. borrower to pay for PMI so that
the lender is covered in case the
PMI is an insurance product sold borrower later defaults on the
by some private insurance loan. The premium charged by
companies. PMI protects a lender insurance companies for PMI is
in case a homebuyer does not or usually a percentage of the loan
cannot maintain payments on their amount. The premium is normally
home loan or mortgage. In other rolled into the borrower’s
words, PMI protects lenders from mortgage payment. While PMI
loss if a buyer defaults on their increases a borrower’s monthly
loan. payment, it does help them get a
home loan that they may not
If you are getting a loan to otherwise be able to obtain.
purchase a home or other real
estate, most lenders require that As an alternative to PMI, many
you put 20% of the purchase price lenders offer two loans to reach
as down payment. However, not all the amount of money needed by a
homebuyers have that amount of borrower. For example, a borrower
money available for a down may obtain a first mortgage for
payment. It is not uncommon for 80% of the loan amount, and a
buyers to only put 15% down, or second mortgage for 20% of the
10% down, or 5% down, or in some loan amount, which totals 100%
cases, no down payment is financing.
applied, and the lender provides
100% financing. Homebuyers should remember that
PMI protects only the lender and government has a program similar
not the homebuyer. If a borrower to PMI called Mortgage Insurance
does not maintain payments on a Premium (MIP). PMI is not related
mortgage, the lender will mostly to homeowner’s insurance, which
likely initiate foreclosure covers your property against
proceedings. specified damage or perils.
Borrowers should know that some Be sure to shop various lenders
loan programs have strict credit to identify the best loan program
and income eligibility criteria for your particular situation.
to qualify for the loan. You
should also know that U.S.
About the Author:
San Diego Condos
Rancho Bernardo Homes
Poway Homes
Read more articles by:
Real Estate Pros
Article Source: www.iSnare.com 
