What is PMI?
After talking to their mortgage lender, lots of New Orleans home buyers have the same question. What is PMI?
PMI = Private Mortgage Insurance
If you put down less than 20% of the sale price of your home, your lender will more than likely require you to carry mortgage insurance. This insures the lender against loss in the event of a default, with you paying the premiums each month as part of your mortgage payment.
FHA loans require an up-front premium at the time of closing and an annual premium that is divided by 12 and added to each monthly payment.
VA loans require a funding fee and no annual or monthly premiums. The good news for VA borrowers is that the funding fee can be rolled into the mortgage, saving you some out of pocket costs when closing.
The good news
PMI allows you to buy a home without having to save a substantial down payment. FHA loans require just a 3.5% down payment.
The bad news
The only beneficiary of this insurance is your lender, even though you are responsible for the annual premiums.
Need some advice on the best loan to buy your New Orleans home? Call us at 504-327-5303 and we’ll connect you with a local expert.