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pmi questins

I'm having hard time understanding pmi. I know I have to have insurance, but my loan type requires me to put down 2% of the loan amount at closing! Do all types of mortgage loans require this down at closing? I thought I just had to purchase the insurance and pay monthly premium and show proof of insurance to the lender?? Any helpful info will defiantly be great r/n! by bachmann478 from Tallahassee, Florida. Aug 14th 2019 Reply

Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,719 contributions

If you are buying a home with less than 20% down, you have to deal with mortgage insurance somehow. The most common is monthly mortgage insurance, that is added to your payment. Then there are other options, like lender paid, or borrower paid mortgage insurance, which essentially means you have no mortgage insurance monthly, but the lender has increased the loans interest rate to cover the cost of the mortgage insurance. The lender will handle all the mortgage insurance, and you have no interaction with that. On the other hand, you also need home owners insurance (fire, theft), which YOU are required to go obtain, then provide proof to your lender. I lend in MN, WI, SD, and can be reached at NMLS274132

Aug 14th 2019

It can be very confusing to understand. There is a difference between hazard insurance (homeowners insurance) and PMI. Hazard insurance is required on all loans to cover the home in case of Fire so it can be rebuilt. It's their collateral after all. PMI came about I believe around the Nixon era. Consumers used to have to put a lot of money down in order to buy a home. Lenders didn't feel comfortable sticking their necks and investments out ion a limb with little equity. So the government passed a law that any loan over 75% loan to value would require PMI. This is an insurance policy paid for by the consumer that protects the lender in case of default (consumer goes into foreclosure) if a consumer loses their home to foreclosure, the bank will get a payout from the insurer to cover a certain % of the loan. This way the bank is not technically lending at a higher loan to value. Fast forward and now PMI is required on any loan over 80%Now with that said, the homeowners Protections act states in certain cases the PMI could automatically be removed once your loan to value gets down to 78% of the original value. So if you originally did an 85% loan, once your balance gets to 78% of the original value used, then it will drop off. I hope that helps. One protects the home and one protects the lenders loan.

Aug 15th 2019
Dave Skow (daveskow)
#16 ranked lender in Washington - 318 contributions

Mortgage ins is protection for the lender ( not you ) and this is needed only if the down payment is under 20% of the price ...homeowners insurance is required to protect you and is required for all loans ...these are two totally different types of insurance

Aug 20th 2019
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