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Will I Need PMI?

February 9, 2016 by Ricardo Leave a Comment

Doctor Mortgage PMI

Doctor mortgage loans provide many advantages, and not requiring PMI might be one of the biggest ways you can save money. Many people think of PMI (private mortgage insurance) as a necessary part of any mortgage loan if the buyer has less than 20% equity in the home. For those new to the home buying process, that means if you put less than 20% down on a house, you’ll pay a monthly premium for PMI. This additional cost for mortgage insurance protects the lender’s investment if you fall behind on your monthly payments and default on the loan. Here’s an excerpt from MGIC, a mortgage insurer.

PMI…is a financial guaranty that reduces the loss to the lender or investor in the event the borrowers do not repay their mortgage.By using MI to reduce risk, the quality of the mortgage as an asset is enhanced.  – MGIC

If you don’t pay your mortgage note and default on your conventional mortgage, the mortgage insurance company is responsible for a portion of the loan amount.

In sum, PMI is designed to protect the lender, not you. It’s an additional monthly cost for you. If you’re paying PMI, you’re not paying down your balance.

How much can PMI cost me?

PMI rates vary pretty widely, but most banks charge anywhere between .3% and 1% of the original loan amount. On a $400,000 home with 5% down, you might be paying anywhere from $95.00 to $316.00 per month on insurance. If  you paid 1% with a particular lender, wouldn’t you rather save $316.00 per month? Over 5 years that would be over $18,960.00.

Here’s where doctor mortgage loans come in.

Sometime in the mid-2000’s, bank analysts ran detailed reports on thousands of mortgages held by doctors and determined that default rates were extremely low.

Banks don’t do things that are risky or have the potential to create losses. As a physician, you are considered one of the most stable, credit-worthy professionals, so in general banks want to engage and keep you as a long-term customer.

Thus, the no PMI doctor loans were born.

Not having to pay PMI on a doctor loan means you can put more of your money towards a home and paying down your loan balance, not towards reducing risk for a bank.

I’ve included this video for our visually inclined readers:

For more information about doctor mortgage loans, read our Epic Guide to Physician Loans.

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“My husband and I used Doctorloanusa.com to obtain a physician loan for our new house. The lender that we were connected with was wonderful and went above and beyond our expectations. We love our new house and we have you to thank for this mortgage program. I have referred several of my friends to your site, and specifically to the physician loan lender that helped us.”

– Dr. Bryant

“Our physician mortgage lender was absolutely amazing throughout the process. He made himself available at all hours of the day to help us with whatever we needed. We looked at several other companies and their service could not compare to our experience with him.

Most other companies did not understand our situation as new physicians with medical school debt, but he made the mortgage process easy and gave us a great doctor loan package. We could not be more happy with our experience!”

– Doctors Jessie & Bill L.

“We want to thank you both for all of your hard work on our doctor loan.  You were timely, efficient and even had a sense of humor! Awesome.”

– Dr. Voni S.

“We are moving in on Friday and we are so excited. This is a life-changing event and our dream home could NOT HAVE HAPPENED if it was not for all your hard work, especially in our unusual situation. Thank you so much for working to get the loan and you are OUR HERO!.

– Dr. Ellen G.

“Thank you so much!  I have been through this process before and I can say that this was a much smoother process and I credit you with facilitating that. The home we purchased is exactly what we wanted and where we wanted it. This would not have happened without your help and mortgage program.

We run across many people who are in the same position as Gaby and I – relatively fresh out of training, a lot of earning potential, but not a whole lot of savings… I will gladly give your name to them if I learn they are shopping for a physician loan. Thank you again!”

– Dr. D.F.

“You and your team did an outstanding job within such a short amount of time. Thanks for making it happen! Kudos!”

– Donte D, REALTOR®

“Thank you so much again for working so diligently with me to obtain our new home.  We had a setback with the moving company but finally got our belongings back. We are settling into the new home. Thanks again!”

– Dr. Geoffrey M.

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