What is PMI? And Why You Shouldn’t Be Scared of It, as a home buyer

What is PMI? And Why You Shouldn’t Be Scared of It, as a home buyer

Hi, I’m Tom Sommers, and I’m here to talk about something that freaks out a lot of first-time homebuyers: PMI, or private mortgage insurance. When I bought my first home, I remember hearing “PMI” and feeling my stomach drop—another cost?! But let me break it down for you in a way that’s easy to digest, because I promise, it’s not as scary as it sounds. PMI is just a monthly fee lenders charge when you’re buying a home with less than 20% down. It’s their safety net, protecting them if you default on your mortgage loan. It doesn’t cover your equity—it’s all about their investment. So, why shouldn’t you be scared of PMI? Stick with me, and I’ll show you how it’s manageable, temporary, and shouldn’t stop you from chasing your dream home.

Let’s rewind to 2009. After the housing market crashed, PMI costs skyrocketed. For years, homeowners were shelling out $200 a month or more just for this insurance. I’ve seen friends panic over those numbers, thinking homeownership was out of reach. But here’s the good news: times have changed. Over the last five years, with foreclosures at historic lows, PMI rates have dropped—way down. Today, on many loans, you’re looking at $20 to $30 a month. That’s it! Compare that to a decade ago, and it’s a steal. I’ve worked with clients who were shocked at how affordable PMI has become, and it’s opened doors to homeownership they thought were locked shut.

Now, here’s where it gets even better: PMI isn’t forever. Once you hit 20% equity in your home, you can petition your lender to drop it. I’ve done this myself—made extra principal payments to speed things up—and it feels amazing to ditch that extra cost. One catch: if you’ve got an FHA loan, you’ll need to refinance to ditch PMI, which isn’t a big deal if rates have dropped. I’ve seen homeowners refinance, kill their PMI, and lower their monthly payment all at once. Genius, right? The more you put down upfront, the cheaper PMI is anyway, but even with a small down payment, it’s not a dealbreaker. You can make extra mortgage payments—one or two a year—to build equity faster and wave goodbye to PMI sooner.

I get it—PMI sounds like a boogeyman in the homebuying process. But I’m here to bust that myth wide open. It’s just a small, temporary hurdle, not a brick wall. I’ve sat down with loan officers and watched clients’ jaws drop when they realize what they can actually afford. Don’t let PMI scare you off from owning a home. Grab a coffee, chat with a mortgage pro, and see for yourself—I bet you’ll be pleasantly surprised. Homeownership is closer than you think, and I’d hate for something like PMI to keep you from it.

Ready to take the next step? Reach out to me, Tom Sommers, at Coldwell Banker, and let’s get you started on your homebuying journey. Visit www.tomsommersrealestate.com/blog or drop me a line—I’m here to help!

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