Knoxville Mortgages 101 – What Is Private Mortgage Insurance?
One common type of loan many buyers use to purchase a Knoxville home for sale is a conventional loan, which requires the borrower to put anywhere from 5% to 20% down. Any Knoxville buyer than puts less than 20% down on a Knoxville home will be required to carry private mortgage insurance [PMI]. So, what exactly is PMI?
What is PMI?
Private Mortgage Insurance is associated with any conventional loan with less than 20% down. It is paid to the mortgage lender in case the Knoxville borrower is unable to repay their mortgage.
Why Does PMI Exist?
PMI is essentially there to protect a mortgage lender. If a Knoxville homeowner defaults on their loan and if foreclosed on, PMI is there if the mortgage lender is unable to get full payment back from the foreclosure sale. PMI is simply there to protect your lender from loss. PMI is also allow Knoxville home buyers to qualify for a loan with less of a down payment, since not all home buyers have 20% to put down on a home.
Does PMI Ever Go Away?
The good thing about PMI is that it is able to go away after the the Knoxville homeowner has at least 20% equity in their home, thanks to the Homeowner’s Protection Act of 1998. If the homeowner doesn’t cancel their mortgage insurance, lenders are required to cancel the PMI once the loan reaches 78% loan-to-value.
Are you thinking about buying a Knoxville home this year? If there is anyway Knoxville Home Team can assist you, please let us know, you can give Rick at call at 865-696-9002 or send an email to [email protected]. Kati can be contacted at 865-392-5880 or via email at [email protected]. Also, be sure to check out our Knoxville Home Search Page to see what homes are for sale in the Knoxville area.
