PMI sucks, but...

Private Mortgage Insurance (PMI) is the pesky price you have to pay if you put down less than 20% to purchase a home.

No one wants to pay for this because it’s an extra cost that provides ZERO benefit to you. PMI is insurance to cover the lender, not you, in case you default on your loan.

So yes, PMI sucks. But it could be worth the annoying price you pay for it.

What you should know about PMI

1. It’s often over calculated 

If you’re using an online calculator like Zillow to crunch your numbers the PMI estimate is probably overdone.

For example, the PMI estimate for the house I just bought was $492 when in reality it was actually $107. That makes a huge difference when determining how much house you can afford.

Also, keep in mind a high credit score can help you reduce the cost of PMI because the lender sees you as a lower risk.

FUN FACT: I built a free online assessment tool to help you identify the strategy that’s right for you. It looks at your goals, timelines, and numbers to determine your best next step! Check it out here.

2. A bad estimate can keep you out of the market unnecessarily

I just had coffee with someone looking to buy their first home.

They were waiting to buy until they had a 20% down payment to avoid PMI.

Why, besides the wasted expense that it is? Because his online calculator estimated his PMI payment to be over $800 🤢 Yeah, I think I might wait too.

Now that he knows the truth, he is looking to buy and his ability to buy despite PMI leads to point #3

3. Less down payment means you can buy sooner

For me, BUY RENT BUY is how I’ve bought 5 homes in 8 years without selling my primary residence. If I had to put down 20% each time, there’s no way I would’ve been able to do buy all of these properties.

So yes, PMI is an extra expense but it has afforded me the ability to acquire more property, faster than I could have done without it. And as you can imagine, my appreciation, tax benefits, and someone else paying down my mortgage far outweighs the cost of PMI.

And the guy I just met for coffee, he can get into the market now while it’s a buyer’s market instead of waiting to save another $100,000 for his 20% down payment. This also keeps the market from shifting out from under him where the house he wants increases by another 50 grand.

I can’t say this enough, but rarely in life is there is only one way to do something. The same is true here. For some situations, 20% down is the way to go. For others, it doesn’t make any sense.

Everyone’s situation is different. If you want help finding the best strategy for you, schedule a call here, and let’s talk. Or you can Build Your Plan directly on my website for FREE to find your best next step!