Private mortgage insurance, or PMI, is required on most home loans with a down payment of less than 20%. It protects the lender in case you were to default on your loan.
FHA loans are the most expensive when it comes to mortgage insurance. Because of the low down payment, borrowers will pay an upfront mortgage insurance premium (UFMIP) of 1.75%. They are also required to pay an FHA mortgage insurance premium on an annual basis, typically 0.85% of the loan amount. With FHA loans, the annual MIP lasts the life of the loan if you choose to make only the 3.5% down payment when you purchase the home.
While VA loans do not require a down payment, lenders do charge borrowers a funding fee of 1.25% to 3.3%. The amount of the funding fee will depend on whether this is your first time using your VA home loan benefit, what type of veteran you are and how much you are putting down. There is no annual mortgage insurance with VA loans, and the funding fee can be rolled into the total loan amount.
Conventional loans do not have an upfront MIP but charge an annual fee ranging between 0.15% and 1.95% of the loan amount. There are a number of different companies that offer mortgage insurance for conventional loans, more commonly known as private mortgage insurance or PMI. The monthly amount will depend on how much you put down, what your FICO score is, the term of your loan (15-year, 20-year or 30-year) and whether you are getting a fixed-rate or adjustable-rate mortgage. Once your mortgage balance is at 80% of the home’s value, you can call to have the PMI removed. Note that PMI will be automatically removed on conventional loans once your loan-to-value falls to 78%.
USDA loans do not have an upfront mortgage insurance premium, but instead have an upfront guarantee fee of 1% and and an annual fee of 0.35% for purchase and refinance transactions.
Mortgage insurance comparison
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