Private Mortgage Insurance Adds to the Cost of Owning a Home

You don't need 20% down to buy a home, but if you are gonna put less than 20% down, there's a catch, and you're gonna wanna make sure you account for it so you know how much home you can actually afford. This is Austin Klar, your lawyer turned real estate agent, real estate developer in San Francisco, and I'm talking about what's known as private mortgage insurance, or PMI. Not all loan types require PMI, but chances are if you are putting less than 20% down, your lender is probably going to require it, and it's because statistically, people who put less than 20% down or people who have less than 20% of equity in their home are more likely to default. So this PMI, which the lender's requiring the buyer to purchase, designed to protect the lender against the risk of default. The cost of that is borne by the borrower in the form of mortgage insurance premium payments, and that's an additional cost added on to your monthly mortgage payment. So you definitely don't need 20% down to buy a home, but if you are going to put down less than 20%, you need to make sure you account for those mortgage insurance premiums as part of your monthly payment so you know exactly how much home you can really afford. Follow me for more tips about buying a home in the Bay Area. Austin Klar.