When it comes to buying a home, whether it is your first time or your fifth, it is always important to know all the facts. With the large number of mortgage programs available that allow buyers to purchase a home with a down payment below 20%, you can never have too much information about Private Mortgage Insurance (PMI). Buyhome in Shorewood
What is PMI?
Freddie Mac defines PMI as:
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.” Buyhome in Woodridge
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 6%, while repeat buyers put down 14% (no doubt aided by the sale of their home). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes. Buyhome in Plainfield
Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:
The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.” Buyhome in Naperville
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and to help you make the best decision for you and your family. Buyhome in Bolingbrook
2017: What to expect in the housing market
With the new year knocking on the door, one of the questions I hear most frequently is where I think the real estate market is headed in 2017. Buyers, especially, want to know if the market will morph into one a bit more favorable to their interests.
Ah, if only I had a crystal ball and could cut right to the chase to tell you what’s going to happen in the 2017 real estate market. Since we don’t have a handy tool to help us discern the future, we rely on experts in various economic niches for our housing market prognostications every year. Are they always right? Nope, but they do get awfully close.
Personally, I combine what I learn from the economic forecasts with my experience every day as a boots-on-the-ground real estate professional and with our Multiple Listing Service statistics. So, let’s dive in.