What Is PMI Private Mortgage Insurance
Locally, in the Alexandria, Va. real estate market as well as the surrounding N. Virginia metro areas the availability of quality median and entry level prices homes remains very low. With only a few months worth of homes available for sale in most neighborhoods this includes the Runnymeade neighborhood in Alexandria 22310. This lower than normal number of homes for sale is creating a classic supply shortage Seller's Market. Through much of the local market there is approximately a 2 month inventory of homes, based on the current absorption rate. This represents a classic supply Seller's Market.
|When buying a home, whether you are a first time home buyer or a seasoned pro with many home purchases under your belt, it is always important to know all the facts. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI). Note: You do not need 20% or even 5% down to purchase a home. Many people wanting to purchase a home in the Runnymeade neighborhood or surrounding areas will qualify for mortgage loans that require 0% to only 3% down. If you are ready to consider which option is the perfect one for you Contact Me or call direct (703) 585-4687|
What is PMI?
Freddie Mac defines PMI as:
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.” (This does not apply to an FHA mortgage.)
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 5%, while repeat buyers put down 14% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes. As mentioned previously remember that many local home buyers in Runnymeade and other areas of N. Virginia will qualify to use loans with 0% to 3% down and some of these loans are also available without any PMI insurance but often require other costs, still these options might be just right for your situation. Remember just as no two snowflakes are exactly alike neither are two home buyers.
Here’s an example of the cost of a mortgage on a $400,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:
The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.
Source: David's STM blog...