Private Mortgage Insurance (PMI) Makes Low Down Payment Loans Possible
Private Mortgage Insurance is an insurance policy for conventional loans which guarantees a lender against losses in the event that the homeowner stops making their mortgage payments. For buyers who have less than 20%, PMI allows for low and no downpayment loans. PMI, since it is for conventional loans only, is different from the mortgage insurance required on other loans, including FHA and USDA loans.
PMI is required on all conventional loans where the downpayment is less than 20% of the borrowers’ purchase price.
Mortgage insurance helps people become homeowners, who may not qualify because they don’t have a 20% downpayment. Lenders are making new low and no-downpayment loans available to today’s home buyers; and purchase loan approval rates are higher compared to earlier this decade. And, current mortgage rates are very attractive compared to current history. PMI, since it is for conventional loans only, is different from the mortgage insurance required on other loans, including FHA mortgage insurance premiums”, which are for FHA loans only; and mortgage insurance premiums demanded for USDA loans.