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Know About PMI

Wednesday, September 5, 2018   /   by Rich Hernandez

Know About PMI

3 things buyers need to know about PMI

When covering loan options with buyers, you should determine how much they plan to put down. If it’s going to be less than 20 percent, you should have a discussion with them about PMI.

Here are three things you should mention:

1. PMI can be cancelled

Typically, PMI can be cancelled once the principal balance of the mortgage falls to 80 percent of a home’s original value. Other cancellation criteria include good payment history and being current on payments at the time the cancellation request is made.

2. PMI and MIP are different

There are different types of mortgage insurance. PMI is associated with conventional loans. A mortgage insurance premium (MIP) is what borrowers pay toward FHA-insured loans.

The most important thing for buyers to remember is that the rules governing PMI and MIP differ. While borrowers can cancel PMI, refinancing is often the only way to eliminate MIP.

3. PMI protects the lender, not the borrower

Some buyers believe that PMI protects them from foreclosure; this isn’t the case. PMI protects the lender, not the borrower, against loss. Although borrowers are the ones paying premiums, the only real benefit PMI offers to them is the ability to purchase a home without making a 20 percent down payment.

Refer buyers to a knowledgeable loan officer

While agents should understand what loan options are available to buyers, staying on top of the changing rules regarding mortgages just isn’t realistic. By referring buyers to a knowledgeable, competent loan officer, you can safely assume that they’ll get the guidance they need to make an informed decision when applying for a loan.

The Omni Group
Rich Hernandez
3635 West 5th Street
Oxnard, CA 93035
DRE# 01732845

Based on information from California Regional Multiple Listing Service, Inc. as of March 29, 2020. This information is for your personal, non-commercial use and may not be used for any purpose other than to identify prospective properties you may be interested in purchasing. Display of MLS data is usually deemed reliable but is NOT guaranteed accurate by the MLS. Buyers are responsible for verifying the accuracy of all information and should investigate the data themselves or retain appropriate professionals. Information from sources other than the Listing Agent may have been included in the MLS data. Unless otherwise specified in writing, Broker/Agent has not and will not verify any information obtained from other sources. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent.