Prepaid Expenses

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  • Private Mortgage Insurance - One way you can obtain a mortgage loan with a lower down payment is with Private Mortgage Insurance, or PMI. Because you are putting less money down, the lender requires additional security in order to insure them against default. Your monthly PMI is based on the amount of your down payment when you are purchasing, or your amount of equity when refinancing. The more down payment or equity you have, the lower your monthly PMI. Once your loan is repaid to a certain level, the lender may terminate the coverage. Practices for termination vary from lender to lender.

  • FHA Mortgage Insurance Premium - When you are getting an FHA loan, in addition to monthly mortgage insurance which is included in your payment, there is an up front mortgage insurance premium. This larger insurance premium can be financed into your mortgage amount and amortized over the life of your loan. When your FHA mortgage is paid off, within 7 years, the unused portion of this premium is refunded to you if all of your mortgage payments are made on time.