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How Much Does Mortgage Loan Insurance Cost?

By Ann White

How much does mortgage loan insurance cost? Read here how private mortgage insurance is calculated by a mortgage lender!

With interest rates at historically low levels and the average housing price well below the 2006 level, many people consider now one of the best times to purchase a home. Unfortunately, lending restrictions have tightened greatly and most mortgage lenders will not offer a mortgage unless the borrower has 20% down or more. For those with less than 20% down, the lender will charge private mortgage insurance.

Purchase Price of Home

The largest factor that goes into calculating mortgage loan insurance cost is the purchase price of the home. As a general rule, monthly private mortgage insurance normally costs about 1/2400th of the purchase price of the home. So, for a $250,000 home, the private mortgage insurance would cost about $104 per month ($250,000 / 2400). Although, some lenders may base their calculation off of the cost of a home.

Down Payment

Another factor that goes into calculating mortgage loan insurance cost is the down payment put down. Most lenders will require you to get private mortgage insurance if you put less than 20% down. But if you put much less than 20% down, such as 10% or less down, then your PMI will be even more. If you put no money down, you could probably expect to pay twice as much for PMI as someone who put 15% or more down.

Credit Score

The third factor that goes into calculating mortgage loan insurance cost is the borrower’s credit score. Since mortgage lenders are using PMI to offset their risk of the borrower defaulting, they will almost always charge more for PMI if the borrower has a bad credit score. However, the mortgage lender will not be able to charge PMI to a bad credit borrower if the borrower puts 20% or more down.

Related posts:

1. How can I terminate my private mortgage insurance?
2. What Is Private Mortgage Insurance?
3. What Type Of Insurance Do I Need When Getting A Home Mortgage?
4. What Is Mortgage Loan Insurance?
5. Why Do I Need Private Mortgage Insurance?