Private Mortgage Insurance (PMI)
Definition of "Private mortgage insurance (PMI)"
The concept behind a Private Mortgage Insurance (PMI) is pretty simple: it exists to make sure the lender doesn’t lose its money.
What it does is “buy” the possible defaults of a borrower to a lender. Meaning: if the borrower doesn’t pay the premium, the Private Mortgage Insurance (PMI) enters in action and pays it on his/her behalf.
The PMI cost is usually included in the monthly mortgage payment in addition to the principal, homeowner’s insurance, property tax and interest, and just like them, it is a separate thing; it doesn’t build equity to your home.
Why do it?
Well, most of the time you don’t have an option; it is a requirement from the Lender that you get Private Mortgage Insurance (PMI) in order to be able to borrow the money. However, it truly can be good for both parties: the lender doesn’t lose money and the borrower can get a house even if he doesn’t have the whole 20% of the home’s value to use as down payment, since lenders sometimes waive the need of it because of the safety provided by the Private Mortgage Insurance (PMI).
Real estate Tips:
One of the greatest insurances in the world is knowledge! Devour our Real Estate Terms and use our Real Estate Agent Directory to contact a local real estate agent when you're ready to go into the market for/with your house!
Popular Mortgage Terms
A lender offering loans on the Internet who provides mortgage shoppers with the information they need to make an informed decision before applying for a mortgage and guarantees them ...
A contribution to a borrower's down payment or settlement costs made by a home seller, as an alternative to a price reduction. ...
Owner financing or seller financing is a trending real estate concept among homebuyers and sellers. The seller reveals in their asset’s advertising or listing if buyers can purchase ...
The amount of interest, expressed in dollars, computed by multiplying the loan balance at the end of the preceding period times the annual interest rate divided by the interest accrual ...
Proliferation in the number of loan, borrower, property, and transaction characteristics used by lenders to set mortgage prices and underwriting requirements. Nichification is unique to ...
Fees collected by a loan officer from a borrower that are lower than the target fees specified by the lender or mortgage broker who employs the loan officer. An underage is the opposite ...
During the great depression of the 1930s, the government stepped in and came with an innovative loan to help the banking industry recover, thus putting the whole economy back on track. FHA ...
The assumption of a mortgage, with permission of the lender, from a borrower unable to continue making the payments. ...
The option to convert an ARM to an FRM at some point during its life. ...
Have a question or comment?
We're here to help.