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Private Mortgage Insurance

Chad Wolford


Purchasing a home is a dream for most. For those who can’t afford the 20% down payment, private mortgage insurance (PMI) can make that dream a reality. However, PMI can have some disadvantages, too. Here at Rise we take these things into consideration, here is what you need to know about PMI.

PMI Explained

If you default on your mortgage, PMI protects your financial institution from losing money.

For instance, if you purchase a $100,000 home and put 10% down ($10,000), then the lender is responsible for 90% ($90,000). So, $90,000 is then multiplied by 0.005% for an annual PMI of $450, or $27.50 per month.

Navigating PMI

In today’s market, avoiding PMI is difficult. However, even if you can’t afford to put 20% down when purchasing a home, there are things you can do to try and avoid PMI:

  • Talk with your lender. They may have a less-than-20% rule in place if you have a good credit score.

  • Obtain an 80-10-10 loan. On this plan, 90% of the loan is financed with a first mortgage equal to 80% of the sale price. Then, a second mortgage with a higher interest is applied for the remainder of the sale price. The monthly payments for these two mortgages are usually lower than paying one mortgage with PMI.

  • Tell your lender that paying PMI is a deal-breaker for you and that you will take your business elsewhere if it isn’t waived.

Establish a Budget

When you’re looking for a home to buy always stick to a budget. Only look at properties you can afford without putting yourself in a financial crunch. After all, remember that even after you purchase the property itself, you will still need money to decorate and furnish your home, pay for an inspection, set up utilities and more. All of these expenses can add up quickly, so it’s best not to stretch yourself too thin.

Contact RISE Insurance at 423-541-1111 or chad@riseins.com for a free policy review to make sure you are properly covered.  You can request a quote at https://www.riseins.com/personal-insurance-quote-request or visit our website www.riseins.com to learn more!