PMI- Private mortgage insurance.
What is PMI – it is insurance most lenders require when Metro Detroit home buyers borrow more than 80% of the purchase price of the home. The borrower pays the insurance premium each month when they make a mortgage payment.
When you put less than 20% down in most cases you will have to pay PMI.
Why do I have to have PMI – Private mortgage insurance protects lenders when a borrower defaults. This helps lenders be able to loan more than 80% to Metro Detroit home buyers. Basically what you are doing is paying insurance in case you go into foreclosure. Think of it this way. When a home goes into foreclosure the bank loses a lot of money. The bank has to pay attorneys fees, real estate fees to sell the house, loss of interest from the people not paying, etc. They lose a lot of money when a home goes into foreclosure.
It is a known fact the the less people put down on a home, the more likely they are to default. We are seeing it in the 2008 real estate market. Many of these 100% loans (no money down loans) are defaulting, going into foreclosure. Banks are losing $1000’s of dollars. The loans that have PMI are protecting the banks from some losses on those Metro Detroit homes.
The bottom line is that if you borrow over 80% of the purchase price of the home you will most likely have to pay PMI. There are some banks that will not make you pay PMI but give you a higher rate. (They have included the PMI in as a way of a higher rate) You just have to figure out which is cheaper. Paying PMI or paying the higher rate. Sit down and figure out the payments both ways on your future Metro Detroit Home
For more on Michigan mortgages or Michigan real estate go to my other website if you can’t find the information here. www.RussRavary.com Click on the search for homes button above to find your dream home.
My quote of the day is:
If you don’t want anyone to know, don’t do it