private mortgage insurance
Private mortgage insurance (PMI) insures mortgage lenders against losses in the event of the borrower’s default. By covering default risk on residential first mortgage loans, mortgage insurance makes loans with less than 20 percent down payment available. If you are applying for a conventional mortgage loan with less than 20% down, you will be asked to pay for mortgage insurance. If you are applying for a FHA loan you will be asked to pay a mortgage insurance premium (MIP). The cost of PMI can vary from about ¾% of the loan for loans with only 5% down to around ¼% for loans with 15-20% down. FHA loans ask for a one-time fee of 3.8% of the loan amount at settlement, for the cost of mortgage insurance.
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