Understanding PMI (Private Mortgage Insurance)
PMI is mandatory insurance when you borrow with a down payment below 20%. PMI protects the bank in case you cannot repay the loan.
💡 PMI typically costs 0.5-1% of the loan amount per year. PMI will automatically end when LTV (Loan-to-Value) reaches 78% or you can request removal at 80%.
Property Tax by State
Property tax in the US varies significantly by state:
- High-tax states: Texas (2.1%), New Jersey (2.2%), Illinois (2.0%)
- Low-tax states: Hawaii (0.3%), Alabama (0.4%), Louisiana (0.5%)
- California has Prop 13 limiting annual tax increases
Closing Costs Explained
Closing costs include various fees when completing a home purchase transaction:
Main fees:
- Bank fees (origination fee, processing fee)
- Property appraisal fee
- Attorney fees and title insurance
Closing costs typically account for 2-5% of the loan amount. In New York, closing costs can be higher due to mortgage recording tax.
Frequently Asked Questions
💡What is PMI and when can I remove it?
PMI (Private Mortgage Insurance) is mandatory insurance when down payment < 20%. PMI typically costs 0.5-1% of the loan amount per year. PMI will automatically end when LTV reaches 78% or you can request removal at 80%.
💡How does property tax vary by state?
Property tax in the US varies significantly. Texas and New Jersey have the highest rates (2.1-2.2%), while Hawaii and Alabama have the lowest (0.3-0.4%). California has Prop 13 limiting annual tax increases.
💡What are closing costs and how much do they cost?
Closing costs include bank fees, appraisal fees, attorney fees, title insurance, and other fees. Typically 2-5% of the loan amount. In New York, closing costs can be higher due to mortgage recording tax.