When you purchase a home, there are many different costs associated with the process, and sometimes it can be confusing when trying to understand the different payment requirements that go along with home financing. One such cost that you may be responsible for paying is private mortgage insurance, particularly if you are interested in obtaining a conventional loan to help you buy the home. If you are looking to buy a home in Jacksonville, Florida, and need assistance obtaining a loan and understanding private mortgage insurance costs, North Star Mortgage Network, Inc. can help. Read on to learn more about private mortgage insurance requirements.
Understanding Private Mortgage Insurance
If you are planning on paying less than 20% down on a home with a conventional loan, most lenders will require you to pay private mortgage, or PMI. Private mortgage insurance is also required when refinancing your mortgage with a conventional loan and having less than 20 percent home equity built up. PMI is intended to protect the lender if the borrower defaults and is unable to make loan payments. A borrower must pay a monthly insurance premium to an insurer, which will then go towards part of the loan balance that is due to the lender. Although it is an additional cost when buying a home, paying for private mortgage insurance does help a borrower that may not typically qualify for a loan become eligible for one.
Private Mortgage Insurance Prices
The cost of private mortgage insurance is based on many factors, and varies depending on certain situations. The cost of PMI will depend on the amount of mortgage you take out, and essentially, the more money you borrow, the higher the cost of your private mortgage insurance will be. The down payment amount you are able to pay will also affect your PMI costs; you will pay less PMI the higher down payment you are able to afford. Additionally, the type of mortgage you obtain will impact your PMI cost. Private mortgage insurance tends to be more expensive with an adjustable rate mortgage because the interest rate can fluctuate with this type of loan, and pose a higher risk than a fixed rate mortgage. Another factor that will affect your private mortgage insurance costs is your credit score; the higher your credit score is, the less expensive your PMI will be. Once your loan balance reaches 78% of the original purchase price of the home, you will no longer be required to pay private mortgage insurance.
Getting Assistance With Private Mortgage Insurance
If you are interested in buying a home in Jacksonville, Florida, and want to know more about private mortgage insurance costs, the specialists at North Star Mortgage Network, Inc. can help. Contact our office today for a consultation.