Buying a home is exciting—and expensive!
There is no special type of insurance for first-time home buyers. However, you may need to pay for mortgage insurance if your down payment is less than 20%.
PMI or private mortgage insurance is a temporary type of insurance that a homebuyer pays to protect the lender if the down payment is less than 20%. This fee is usually 0.5 to 1% of your total loan amount each year. If you buy a $300,000 house, you may pay between $1,500 to $3,000 per year for PMI.
Banks know that someone who puts down a lower down payment has a higher risk of defaulting on the loan. Once you have paid off 20% of the home’s equity, you can cancel PMI or refinance the loan.
You will also need a standard homeowners insurance policy to cover the physical building and your personal possessions. The average annual cost of homeowners insurance is $1,260 per year.
Your best strategy to reduce costs is to save up a large down payment. Then, when you’re ready to shop for insurance, use the Jerry
app to compare rates from top companies. If you have any questions about homeowners insurance
, reach out to Jerry
. Our friendly agents are just a text or phone call away. We can help you make a plan to turn your homeownership dream into a reality.