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What Is PMI For A Conventional Home Mortgage Loan?

By Bob Redtree

Insider information that explains PMI for a conventional home mortgage loan.

Most mortgage loans have some type of guarantee that insures the lender in case the borrower defaults on the payments. A conventional home mortgage loan is not insured or guaranteed by a government agency such as the Federal Housing Administration or the Veterans Administration, so there must be PMI or Private Mortgage Insurance.

Low Down Payment Requires PMI

The borrower must have PMI on a conventional home mortgage loan if they are paying less than twenty percent down. There is usually a premium payment to be made at the time of closing and a monthly premium payment for the private mortgage insurance. This premium may be included in the total amount of the monthly mortgage payment.

The Escrow Account

The company servicing the loan will create an escrow account into which a certain portion of the monthly mortgage payment is deposited and designated as being for the insurance premiums. These payments are made by the company as they become due. The loan contract will show how much of the payment is designated for paying insurance premiums. This will also be shown clearly at the time the mortgage contract is signed.

The Escrow Account Statement

The borrower will receive an escrow statement about once a year. The statement shows how much was allotted to paying insurance and how much was actually paid out from the monthly mortgage payments. The designated amount may increase slightly each year if the there is a cost of living increase. If more funds were withheld than were actually needed to pay the premium then the borrower will see a credit to the escrow account.

All of these options will be explained in detail by the lender at the time the mortgage contract is signed.

Related posts:

1. Why Did The Payments On My Fixed Rate Mortgage Change?
2. Can A Bank Change My Fixed Rate Mortgage?
3. What Is MIP For A FHA Home Mortgage Loan?
4. What Credit Score Do I Need To Qualify For A Conventional Home Mortgage Loan?
5. What Does Escrow Entail On A Home Mortgage Loan?