Just as you’re required to have auto insurance when you purchase a vehicle, you’re also required to have insurance when you buy a home. Homeowners insurance and PMI insurance are two different types of insurance for homeowners, but you might not need both.
Here’s some basic information to help you better understand homeowners insurance and PMI differences:
•Homeowners insurance is the type that every homeowner needs to have. This insurance covers damage to your home’s structural features and your personal property due to several unpreventable causes, such as fires, theft or wind damage. Most policies don’t cover damage from floods or earthquakes, so you’ll need to purchase additional insurance for these natural disasters separately, depending on where you live. Homeowners insurance also provides liability coverage, in case someone is injured on your property.
•PMI insurance, or private mortgage insurance, is only required if you make a down payment of less than 20 percent on your loan. This type of insurance protects the lender in case you end up defaulting on your loan. The fees for this type of insurance depend on how much of a down payment you made and what your loan amount is. Keep in mind that when you hit 80 percent on the loan-to-value ratio, you no longer need to pay PMI premiums.
Knowing more about homeowners insurance and PMI differences is just one part of the home buying process. You’ll also need to know how to choose a mortgage, how much of a home you can afford and where to look for a home. Having a reliable real estate agent at your side can make this process much easier.
Ready to get started on the home buying process? Contact John Cantero at 918-313-0408. I’ll show you the way home!
Posted on August 20, 2014 at 3:07 pm by John Cantero (918) 313-0408