There are a lot of steps that people need to take when buying a home. One of the most common issues that people discuss is the down payment. Most banks will require a down payment so that they aren’t the only ones taking on the risk of buying a home. The common question people have is how much of a down payment they should apply.
When you are buying a home, you may run into a number of hurdles to complete the purchase. One of the items that you may be asked to purchase is called private mortgage insurance, often shortened to PMI. This is a unique insurance policy that your lender, such as the credit union or bank, may ask you to buy in order to protect themselves. In this insurance policy, the bank protects themselves against losing money if you end up defaulting on your loan.
If you are reading this article, it’s entirely possible that you are considering buying a home. It’s also likely that you are weighing certain financial options between a sizable down payment or taking on the expense of mortgage insurance.
You may be wondering what PMI is and how you know when you need to purchase it.
Below is the short version of what you need to know.