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      Blog :: 06-2019

      What You Need to Know About Private Mortgage Insurance (PMI)

      What You Need to Know About Private Mortgage Insurance (PMI) | MyKCM

      Whether it is your first time or your fifth, it is always important to know all the facts when it comes to buying a home. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).

      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.”

      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 13%. For first-time buyers, that number dropped to 7%, while repeat buyers put down 16% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.

      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

      What You Need to Know About Private Mortgage Insurance (PMI) | MyKCM

      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.”

      Bottom Line

      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 help you make the best decision for you and your family.

      The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

      Time for Your Dream Home, Gen X!

      Time for Your Dream Home, Gen X! | MyKCM

      During the housing market crash, Gen X homeowners lost more wealth than other generations. However, things are changing now! A strong economy, increasing home prices, and the recovery of the housing market are helping this generation to regain their lost wealth.

      According to Pew Research Center,

      Their fortunes have rebounded more than those of other generations during the post-recession economic expansion and as home and stock prices have risen. Since 2010, the median net worth of Gen X households has risen 115%. In fact, in 2016, the most recent year with available data, the net worth of a typical Gen X household had surpassed what it was in 2007 ($84,200 vs. $63,400)”.

      The same report also mentioned,

      15% of Gen X’s homeowners were ‘underwater’ on their homes in 2010 (meaning they owed more than they owned). By 2016 only 3% were underwater.

      As a result of homes regaining market value and their increasing net worth, many Gen Xers are presented with the opportunity of selling their current home in order to move up to the house they always dreamed of!

      According to the 2019 Home Buyers and Sellers Generational Trends Report by the National Associations of Realtors, in 2018 Gen Xers made up the second largest share of home buyers by generation at 24%.

      The report also provided some highlights about their purchase:

      • Greatest share that purchased a multi-generational home (16%).
      • Largest share that purchased a detached single-family home (88%).
      • Highest median household income ($111,100).
      • Bought the most expensive homes of all the generations.
      • Job-related relocation was identified as the primary reason to buy.

      But this generation is not only buying- they are selling too!

      • The largest share of home sellers (25%).
      • Highest median household income among sellers ($123,600).
      • Tenure in the previous home was a median of 9 years.
      • House too small was indicated as the primary reason to sell.
      • 91% sold the home using a real estate professional.

      Bottom Line

      If you are a Gen Xer who would like to know exactly how much your house is worth today so you can move up to the home of your dreams, let’s get together to analyze your current circumstances.

       

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