Because of the current economic climate, it’s really a buyer’s market out there for a first-time homeowner. However, many people who are considering making the decision to own their first home just don’t have the 20% down payment that is required. There is a solution. Something called PMI (Private Mortgage Insurance), also known as LMI (Lenders Mortgage Insurance) could be the answer. It is a way to qualify for a reasonably priced monthly mortgage payment as well as a way to lessen the risk in this unpredictable housing market.

How Can Columbia Private Mortgage Insurance Work for You?

As most people know, the number of home foreclosures in 2008 was at an all time high. This means that PMI might come into play in a more prominent manner in the near future because it enables the lender to be protected from a loss if a loan is defaulted on by the buyer.

PMI also has the advantage for the buyer of allowing them to put down a lower down payment than average, usually in the range of 3 to 5 percent. The buyer does not have to wait to save up the typical 20 percent down payment, and therefore can take ownership of a home much sooner than they normally would.

PMI is also preferable to piggy-backing loans, a situation where the lender offers a second mortgage to the buyer, which, when combined with the first, provides the lender the money to fill in the monetary gap. Piggy-back loans can be risky for both the buyer and the lender.

What is the Price of Private Mortgage Insurance?

The cost of PMI and the payment plans differ according to which lender the homebuyer uses. Monthly rates can be as low as $55, while some lenders prefer to charge an annual fee, which can range from $1,500 to $2000 and is due when the loan closes.

There are a number of variables taken into account when the lender sets the cost of Private Mortgage Insurance:

  • The amount of the loan
  • The buyer’s credit score
  • The terms of the loan
  • The LTV (Loan to Value Ratio)
  • Whether or not the property is a primary residence
  • The payment structure, be it a single payment, an annual payment, or a monthly payment

What Are the Other Advantages to Columbia Private Mortgage Insurance?

Besides offering you a low down payment, there are other monetary advantages to purchasing PMI:

  • PMI offers tax deduction. A law was passed in 2006 that allows people with an annual income of less than $109,000 to take their PMI payments as a tax deduction. However, this law applies only for mortgages written between December 31, 2006 and January 1, 2010.
  • There are no payment surprises with PMI. When PMI is purchased, the premiums are set and do not change over time. This is a huge plus for those on a tight budget who would not be able to afford fluctuations such as balloon payments.
  • PMI can work in conjunction with programs for those with low incomes. Many lenders and insurance companies work in cooperation with community programs to assist low-income individuals in obtaining a reasonably priced mortgage that they can afford.
  • PMI brokers offer education on how to buy a home. Brokers who offer PMI often offer educational seminars and programs to assist those interested in buying a home. They can also help those who’s financial situation changes and are having trouble making payments. In this way, they help lower the high rate of foreclosures.

It is Possible to Cancel PMI?

In the late 1990s, a law was passed that protects homeowners who have PMI against paying for it when it is no longer needed. The law states that the lender must alert the borrower when the LTV (Loan-to-Value Ratio) of the home is 80%, in which case PMI would no longer be necessary.

The LTV value of a home generally reaches 80% when the principle on the loan has been paid down to a certain amount; the home goes up in value, or both.

In order to qualify for cancellation of PMI, the insured must have a good history of premium payments. Disqualification for cancellation is possible if there have been any 30-day delinquencies in the period of one year before the date of the cancellation request, or if there are any 60-day delinquencies before the two-year mark of when the request for cancellation of the PMI was received.

For any reason if the insured fails to respond when the lender first sends out notification of the 80% LTV, the broker is legally required to cancel the PMI when it goes below the 78% mark.

If the insured can prove, through a home appraisal, that the LTV has come down to 80% before the insurer sends out an alert, the appraisal can be submitted to qualify for cancellation of the PMI.

In short, PMI offers many benefits for the first-time home buyer. Private Mortgage Insurance helps overcome the obstacles of buying a home during these uncertain economic times.

Get more information from ColumbiaHomeInsuranceQuotes.org – take advantage of the no-cost Columbia insurance quotes that ColumbiaHomeInsuranceQuotes.org has to offer.