While the traditional target for a down-payment is 20 percent of the home’s purchase price, for many buyers, saving that much could take several years – years of paying rent that could otherwise be going toward their home’s equity. This is where private mortgage insurance comes in handy!
Private mortgage insurance, or PMI, makes it possible for homebuyers to qualify for a home loan with a much lower, more obtainable, down-payment. Many lenders offer conventional mortgages with down-payment requirements as low as 3 percent! In exchange for accepting a lower down-payment, the lender will include an additional fee to your monthly payments that will serve as protection in case you were to ever stop making your mortgage payments.
The thought of having an additional monthly charge may seem like a bummer, but the good news is you won’t have to pay it forever! Once your home’s equity reaches 20 percent of the property’s value, you may be able to call your lender and request to have your PMI premium removed.
So, here’s the big question – is PMI worth it or should you wait to save 20 percent for your down-payment? Well, the best decision for you will depend on your finances, credit history and your personal homebuying goals. You may choose to wait until you have saved enough, but keep in mind that if you continue to rent during this time, you’ll be putting money in your landlord’s pocket instead of your own. For many homebuyers, PMI is an opportunity to purchase their dream home and begin building equity on their own property, sooner rather than later.
If you’re ready to start exploring your financing options, stop by your nearest Pulte Homes Sales Center or book a virtual appointment and speak to a Pulte Mortgage Financing Advisor today!
