FirstBank FTHBPacket FinalNoBleeds - Flipbook - Page 10
If you take advantage of a low down payment mortgage, it’s important that you
understand how private mortgage insurance (PMI) works.
WHAT IS PRIVATE MORTGAGE INSURANCE?
Private mortgage insurance, or PMI, is a type of insurance that’s
often required when buying a home with less than a 20% down
payment. As the homeowner, you’ll pay PMI monthly premiums
with your home loan payment. This type of insurance protects
your mortgage lender in the event of default.
Private mortgage insurance is specific to conventional home
loans, which typically require a minimum down payment
between 3% and 5%. But this isn’t the only type of mortgage
program that requires mortgage insurance. USDA and FHA
home loans also require mortgage insurance when a borrower
puts down less than 20%.
HOW TO GET RID OF PRIVATE
If you decide to purchase a home with a
lower down payment and pay the PMI, you
may be possible to eliminate this expense in
If you have a conventional mortgage, the
good news is that mortgage lenders waive
mortgage insurance once the property
has at least 22% equity, although you can
request its removal once the property has
To get rid of mortgage insurance with an
FHA home loan, you would have to refinance
the mortgage once the property has 20%
equity, getting either another FHA home
loan or another type of mortgage. This
also applies when getting rid of mortgage
insurance with a USDA home loan.