When you finance a home for less than the traditional 20% down, most mortgage lenders require you to pay property mortgage insurance. Since you have to pay the premium for the insurance, you may want to do some premium rate shopping to choose the best property mortgage insurance for your budget.
Generally, this type of mortgage insurance is referred to as private mortgage insurance or PMI. Mortgage insurance protects the lender for loaning you more than it normally would on the purchase or refinance of a home. When you choose your mortgage lender, the representative will automatically quote you an estimated price for the mortgage insurance premium you will have to pay.
You have the option to go with the mortgage insurance company that your lender works with or you can opt to shop around. Property mortgage insurance is generally not an expensive premium payment. In order to ensure that you are choosing the best private mortgage insurance provider, contact some additional mortgage insurance providers.
You will need to provide information to the private mortgage insurance company in order for them to provide you with a premium quote. Generally, the company will ask for the purchase price or market value of the home. You also need to let them know which state the home is located in and how much of a mortgage you are placing on the home.
In addition to the premium amount, you should also inquire as to how you can make the premium payments. Most property mortgage insurance companies allow you to escrow the private mortgage insurance premium. This means that you pay it on a monthly basis as part of your mortgage payment to your mortgage company. The mortgage company then pays the mortgage insurance premium to the insurance provider.
Most mortgage companies require you to escrow, so they can ensure that the policy premium is paid and always up-to-date. If you prefer to pay the policy premium upfront and on an annual basis, then verify that this is an option with the insurance provider. You should also verify that this is acceptable to the lender. Typically, if you choose your own property mortgage insurance company, the lender requires you to prove that the policy has been paid and is in effect.