If you’re looking to purchase real estate in the Roseville area, chances are you are overwhelmed with all of the steps and research that is in front of you. That is why it is important to partner with a mortgage company that is going to thoroughly explain the process and educate you.

One of the things that often confuses home buyers is Private Mortgage Insurance (PMI). PMI typically kicks in with a conventional loan when the borrower has less than 20 percent for a down payment. It is usually built into the monthly premium on a mortgage payment and will appear on a closing disclosure when the loan closes.

To help, we have identified three common misconceptions about PMI in hopes that it can alleviate some of the uncertainty you may be feeling about purchasing a new home.

Misconception 1: You will have to get PMI if you don’t have 20 percent for a down payment

In general, you will be required to get PMI with conventional financing if you have less than 20 percent for a down payment. However, there are other loan programs that don’t have a PMI requirement. For example, there aren’t PMI requirements with VA Loans and other alternative loan programs may allow for a lower PMI payment.

Misconception 2: You will always have PMI

This is not true. As soon as you have built up over 20 percent in equity in your house, you are eligible to get rid of PMI. In addition, if your principal balance hits the 78 percent of the original value threshold, then PMI is removed.

Misconception 3: It is insurance that shields the borrower

Even though “insurance” is in the title, PMI is not there to shield the borrower from defaulting on a loan. It is actually to protect the lender if the borrower can’t make the mortgage payments. So, in the case of a foreclosure, PMI would offer no protection to the borrower.

We hope that we have helped clear up some of the misconceptions you may have about PMI. If you have any further questions about this or about any loan programs that you are interested in, don’t hesitate to reach out to us!