Side note: Don’t forget to also consider homeowners association (HOA) fees when preparing your monthly home budget-in case your new house is part of an HOA. That 25% limit includes principal, interest, property taxes, homeowners insurance and especially PMI! So to avoid being house poor, we teach people to never buy a house with a monthly payment that’s more than 25% of their take-home pay. What most buyers don’t realize is that PMI can add hundreds of dollars a month to their mortgage payments. You could pay the annual PMI fee up front along with all your closing costs or split it into monthly payments as part of your mortgage. PMI covers your lender because they’re the ones lending you more than 80% of the sale price.ĭave Ramsey recommends one mortgage company. PMI in no way covers your ability to pay your mortgage.
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