If you’re buying a condo in LA, it’s a good idea to come up with a 20 percent down payment. That means your mortgage payments will be lower, and lenders may look at your loan application more favorably than they would if you brought less of your own money to the closing table.
But it’s not always possible to come up with a 20 percent down payment, and there are loan products that allow you to buy a home with less down. The catch? Without a 20 percent down payment, you’ll most likely have to pay for private mortgage insurance, or PMI.
What is Private Mortgage Insurance?
Private mortgage insurance is a type of insurance that your lender will most likely require you to buy if you have less than 20 percent equity in the home you purchase. That 20 percent equity usually comes in the form of a down payment.
Your lender will require you to buy it because if you default on your mortgage payments, the lender will still get its money through the PMI company. It protects the lender, not you.
When Can You Stop Paying PMI?
You can typically stop paying for private mortgage insurance once you’ve built 20 percent equity in your home. At that point, the lender can comfortably feel that you’ve invested enough of your own money to stick things out and make all your future mortgage payments.
You may need to call your lender to stop paying for PMI, although some loan programs stop charging you for it automatically at a certain point.
Are You Buying a Condo in Los Angeles?
If you’re thinking about buying a condo in Los Angeles or a nearby community, call us at 213-254-7626 or contact us online.
While you’re here, check out our:
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