Think You Need 20% Down to Buy a Home? Think Again

If you’re a first-time homebuyer, you’ve probably heard that you need to save up 20% for a down payment before you can even think about buying a house. It’s a common homebuying myth that slows many people down in their path to homeownership.

The fact is that you rarely need a 20% down payment to buy a home, but there is a catch. If you put down less than 20%, most lenders will charge an additional monthly fee called Private Mortgage Insurance (PMI), which can cost homebuyers tens of thousands of dollars in extra fees over the life of their loan.

But there’s good news! Most mortgages offered by Firemen’s Federal do not require PMI – even with a low or no down payment. That means a smaller down payment doesn’t have to mean a bigger, more expensive monthly bill.

Here’s what you should know about PMI, why it matters, and how Firemen’s Federal helps you skip it.

What is PMI?

PMI is a type of insurance that protects the lender (not you) if you’re unable to make your mortgage payments. Most lenders require it when a borrower puts down less than 20% on a conventional home loan, because a smaller down payment means more risk for the lender if the loan ever goes into default.

In other words, PMI isn’t there to protect your investment in your home. It exists purely to protect the bank’s investment in you.

Why PMI can be so costly

PMI is typically rolled into your monthly mortgage payment and can cost between 0.5% and 1.5% of your loan amount every year. On a typical home loan, that can easily mean paying between $100 and $400 extra every month. Homeowners usually must continue paying PMI until they reach 20% equity in their home, which can often take years.

Over the life of a loan, those payments add up. Depending on the size of your mortgage and how long it takes to build equity, PMI can end up costing a homeowner anywhere from several thousand to tens of thousands of dollars – all for a policy that offers the homeowner no direct benefit.

Why this matters for your homebuying journey

Because most Firemen’s Federal mortgages skip PMI, you could potentially buy a home much sooner than you thought possible, without spending years saving for a large down payment. And once you do buy, your monthly payment stays more affordable without an extra PMI cost tacked on that does nothing for you.

Ready to see what you qualify for?

Every homebuyer’s situation is different, and our team is here to walk you through your mortgage options, including how you may be able to avoid PMI altogether with Firemen’s Federal. Whether you’re a first-time buyer or ready to make your next move, now’s a great time to find out what’s possible.

Learn more about our mortgages, apply when you’re ready or contact our team to discuss your situation.