Buying a home is an exciting milestone, but we know it comes with a lot of questions. One thing many buyers wonder about is Private Mortgage Insurance (PMI). Don't worry, your local Diamond Residential Mortgage Corporation (DRMC) team is here to explain what PMI is, why it's necessary, and how you might be able to avoid it in Springfield.

What Exactly Is PMI?

PMI protects the lender in case you're unable to repay your loan. If you're putting down less than 20% on a home in Springfield, PMI is typically required. While it doesn't directly benefit you, it helps make homeownership more accessible by allowing you to purchase with a smaller down payment.

Why Do You Need PMI in Springfield?

If you're buying a home in Springfield with less than 20% down, PMI is usually a requirement. It's there to protect the lender, which makes it possible for you to get a mortgage with less money upfront. For many first-time buyers, this can be a great way to enter the housing market without waiting years to save for a larger down payment.

How Long Do You Pay PMI?

PMI usually stays in place until your mortgage balance hits 80% of the home's value. As you make payments or if your home appreciates, you may be able to request removal once you reach that threshold.

How to Avoid PMI in Springfield

If you're looking to avoid PMI in Springfield, here are a couple of options to consider:

1. Larger Down Payment

If you can save up for a down payment of 20% or more, you can avoid PMI altogether. It might take longer to save, but this will save you money in the long run.

2. Consider a Piggyback Loan

A piggyback loan involves taking out two mortgages: one for 80% of the home's value and another for 10%. This allows you to avoid PMI while still putting down a smaller amount. Keep in mind, though, the second loan might have a higher interest rate, so it's important to weigh your options with your lender.

Ready to Get Started in Springfield?

Understanding PMI is just one part of the homebuying process, and we're here to help guide you through it. At DRMC, we'll help you explore all your options so you can make the best decision for your new home in Springfield. Reach out today to start your journey!