Mortgage Basics: Information for First Time Home Buyers

What is PMI and do I have to pay it?

PMI stands for private mortgage insurance. Conforming mortgage lenders usually require it in order to protect themselves when you are borrowing more than 80% of your home value. An experienced mortgage broker can avoid this situation by setting up two loans, one for 80% and a second mortgage for the remaining 10, 15, or even 20% of the home value. The second, smaller loan is usually at a higher rate, but in many cases you save money overall by not paying the PMI. Your mortgage broker should be able to do a comparison and let you know which way saves you the most.