Private Mortgage Insurance is just what it sounds like – insurance. It’s required on home loans where the buyer puts less than 20% cash down. Statistically, buyers with less than 20% cash down payment are more likely to default on their home loans than those who have ready cash. Issued by private companies like MGCI Investment Corp and PMI Group, these policies paid off the mortgage lender if the buyer defaulted.
PMI fell out of favor in the boom-boom years of the early 2000’s (see entry for 80/20 Loans). But with the credit crunch roiling the markets since early 2007, it’s back in a big way. PMI will add $50 or $100 (or more) to your monthly mortgage payment. But for most buyers, it’s cheaper to pay a little every month than scrape for years (decades?) to save 20% of the purchase price of their new home.
Related Posts - 80/20 and 80/15/5 Loans, FAQ files, and Buyer Neighborhood Information
Heather Barr is a Realtor. She's a chow hound, a gym rat, and the only political junkie in the USA who can actually keep her political views to herself. Instead, she focuses on educating her clients about the often-confusing world of residential real estate.
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Heather go check out Real Estate Wiki. You could really contribute to that site with definitions like teh one above while at the same time if you added their Real Estate Wiki Widget to your site it would be cool.