March 30, 2018

What is PMI (Private Mortgage Insurance)?

Michael explains what Private Mortgage Insurance (PMI) is and how to avoid it. He compares and contrasts the two competing loan types and how they apply to different situations.


Conventional loan–the rumor about conventional loans is that you need 20% down. The truth is that first time home buyers can put down as little as 3%.  Non-first time home buyers, or people who have owned in the past can put down as little as 5%.  When you put less than 20% down, PMI is required. There are options on how to pay: you can pay monthly and the payments will fall off over time. Or you can build it into interest rate. First time home buyers also have incentive options.
FHA–this product is broadly available and PMI is required and permanent. It isn’t as popular and targeted to those with lower credit score because rates are good in spite of PMI. Monthly payment is manageable, but long-term savings aren’t as high.
Have questions on which product would save you the most money and fit your needs best? Don’t hesitate to contact us, we’re here and happy to answer your questions!



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Sierra Pacific Mortgage Company, Inc.

Sierra Pacific Mortgage NMLS# 1788. Michael Shotnik NMLS: 218281, CO License: 100017466. Regulated in Colorado by the Division of Real Estate #988320. To check license status of mortgage loan originator, visit D.O.R.A. and NMLS consumer access.