Learn More About the PMI Saver Program

We’ve mentioned before how important it is to figure out where the money to close your mortgage is coming from. Between the closing costs, taxes and insurance, and especially the down payment, coming up with the money to purchase a house can feel like a daunting task. Most people have heard of putting 20% down on a house as the standard. While parents have been telling their kids for the last several decades that this is the norm, these days it feels like a bit of a tall order. Lots of Americans just don’t have that kind of cash conveniently sitting off to the side. Saving has gotten more difficult, too, with inflation and the general cost of living much higher than it was in years gone by. So why did Mom and Dad tell us to put 20% down anyway? Do they even know how hard it is to come up with that today? Is there an easier way to qualify for a decent mortgage without draining our savings? The answer is “yes”, and it lies in a credit union exclusive program called the PMI Saver.

The 20% Rule and PMI

Firstly, let’s address why Mom and Dad gave us this “20% rule” in the first place. It’s generally to avoid paying a monthly fee on your mortgage called PMI. PMI stands for “private mortgage insurance”, and it’s a third-party insurance charge that homebuyers pay to protect the lender from default on the mortgage. It has nothing to do with fire or hazard insurance, nor does it protect the buyer from anything at all. It has to do with equity in the home (or the lack thereof) and the risk to the lender.

When a person doing a conventional mortgage puts less than 20% down on a house they’re buying, the lender will charge them PMI monthly until 20% equity has been reached. Generally, this is done through making regular payments, and once 20% equity is reached, the borrower can call their loan servicer and request the PMI to be dropped from their payments. There is usually a new appraisal needed to verify that the requisite equity amount has been reached (and not lost due to changes in the housing market). Once the servicer is satisfied, the PMI payments are cancelled. If you don’t really feel like paying for another appraisal, you can just wait until the balance of your mortgage reaches 78% of the purchase price of your home, and the PMI will drop off automatically.

How to Save Money on PMI

However, we’ve been talking about saving money, not spending more. If we don’t just have 20% of a house’s purchase price sitting prettily in our local credit union account, and we really don’t want to pay an additional insurance fee that does nothing to protect us, AND the idea of making payments for the next five to ten years just to get rid of it robs us of sleep at night, what are we supposed to do? When you become a member of one of our partner credit unions, you may qualify for a members-only program called the PMI Saver. This program allows a person with a good credit score (on average is 680 or better) to make half the requisite down payment and waive the PMI from their mortgage – forever. That’s right! If a member can afford to put just 10% down on a house, and they’ve done a decent job of keeping their creditworthiness up, Mortgage Center will waive the PMI from the payments automatically, saving hundreds – sometimes thousands – of dollars per year.

Questions? We're here to help!

At the end of the day, the most important thing to do is to talk to your loan officer. They can show you the difference in your monthly payment between our PMI Saver Program and a traditional conventional loan that any buyer could qualify for. There is usually a slight difference in rate because your credit union is taking on a bit more risk, but the difference in payment is overwhelmingly more often in the favor of the buyer. Plus, having extra money in the bank for moving expenses, furniture, painting, or just as a safety net is generally a good feeling to have! You don’t have to feel like you’re disappointing Mom and Dad by not taking their time-honored advice. You just made a smart, members-only decision that any seasoned homeowner is definitely going to respect!