PMI is private mortage insurance and is used with conventional mortgages. Lenders use the formula of 80% loan to value, which means ideally they want to loan no more than 80% of the propery's value. If the loan exceeds 80% then they want to be insured for the difference in the risk. For example: a $100,000 property, the lender wants to loan only $80,00 but the buyer does not have $20,000 for the down payment. According to the buyers' credit standing the lender will accept a $10,000 down payment therefore the loan will be 90% loan to value and the lender will require the buyer to purchase a $10,000 PMI policy to cover the lender's extra $10,000. Later if the loan to value equals or goes below the 80% the PMI policy can be cancelled if the homeowner's credit with the lender is in good standing.
Call Larry Thomas for help in the purchase of your home 406-628-2903
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