When it comes to buying your own home and moving in, there are so many things to consider. Have you prepared for all the closing costs? Do you know what to expect during the closing? Have you figured out which homeowners insurance company you’ll go with? Did you decide between PMI and MIP?
Say what? Wondering what PMI and MIP are? If you haven’t got a clue, hold your horses before you move into that new house! We’ve got some news for you.
PMI is what industry professionals call Primary Mortgage Insurance, while MIP is short for Mortgage Insurance Premium. Depending on where you move, your state may require one or the other at the time of closing. So, what are these types of insurance, anyway?
Both PMI and MIP are insurance options that can be bought to help back your mortgage in case you cannot pay. Basically, these insurance policies are intended to protect the lender, not the homeowner (that’s you!)
Not all states require people moving into their new homes to purchase PMI or MIP. In fact, some states only require such coverage when there is a high-risk loan. So, it is important to know what a high-risk loan is. It’s when the down payment is less than 20% of the property’s value.
So, if you are getting ready to move into your own home, check into what your state requires. You might not even need PMI or MIP.