Unless you have a 20 percent equity position in your home, you will have to pony up for private mortgage insurance (PMI).  This insurance premium typicallycosts between .5 – 1.5 percent of your loan amount, per year.  ($500-$1500/year on a $100,000 loan)  The actual costs depend upon how much equity you have, your credit score and whether you opt for a fixed rate loan or for one that adjusts.

2 Ways to Pay for PMI. 

Buyers can negotiate with the seller to pay a single premium upfront or buyers can roll the premium into their loan.  The downside of rolling it into the loan is that interest will be charged on loan for the premium.   The upside is the interest paid is deductible and the buyer will pay less money out of pocket at closing.

The only way to eliminate PMI is to put 20 percent down and apply for 80 percent financing.   Waiting is the only other way to get rid of the expense.  PMI cancels as you pay down your loan and equity reaches 22 percent of the homes value.

Thank you for visiting Why 6 Percent.  Interest Rates remain unchanged today.  Good news for home sellers and buyers, alike.   Learn more about our flat fee MLS and Realtor.com program for homeowners.  Market your home like the pro’s and save thousands in commissions!