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What is Mortgage Insurance and why do some lenders require it?

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November 07 2011 - Town of Spencer
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Profile picture for sunnyview
PMI does not directly benefit the borrower near as I can tell. It is a way of getting the purchaser with less than 20% down to pay the insurance premium for the lender in case the borrower defaults. I suppose that does open lenders up to loaning more money and that may benefit the borrower in a round about way.
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November 10 2011
Profile picture for SoCal Engr

"One important thing to know is that PMI is fully tax deductible if you earn less than $109k per year."

I'd be very careful giving out that kind of blanket advice, or depending on it. The ability to do this is part of the Bush-era tax measures, which were originally scheduled to end in 2010. They've been on "life support" since then. This link is a bit out-of-date, but gets the point across.

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November 10 2011
One important thing to know is that PMI is fully tax deductible if you earn less than $109k per year.

My profile has some FREE REPORTS that explain some other confusing lender terms.


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November 10 2011

It's designed to protect the lender in the event of losses in foreclosure/shortsales. They have these funds to offset the process of taking the home back in the event of a default.

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November 07 2011
Lender will charge this if you give less than 20%. It is Private Mortgage Insurance.

It goes away after the property is paid down or appreciates the 20%

It is basically you insuring that the bank gets refunded loss if short sale or foreclosure occure
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November 07 2011
Private mortgage insurance (PMI) is monthly premiums that is paid to a lender when you take out a mortgage for less than 20% equity in the home or for certain government loan programs such as FHA and USDA Rural Development.

M
ortgage insurance is used to offset any losses the lender may incur when the borrower is not able to repay the mortgage as agreed, and the lender is not able to recover its costs after a short sale or a foreclosure and subsequent sale of the mortgaged property.
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November 07 2011
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Here's a link to a definition from Zillow.
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November 07 2011
 
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