No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.
Many home buyers in San Diego end up paying for private mortgage insurance (PMI) as a result of making a relatively low down payment. This is common in expensive housing markets.
While private mortgage insurance in San Diego increases your monthly payments, it also enables you to buy a home in San Diego sooner rather than later. It does this by reducing the amount of money you have to put down up front, when using San Diego home loans to buy a house.
This guide explains the typical PMI costs in San Diego, and why some home buyers have to pay it while others do not.
Private mortgage insurance is a unique kind of insurance that’s often required when a home buyer makes a down payment less than 20%.
Specifically, any time a conventional (non-government) mortgage loan accounts for more than 80% of the home’s appraised value, PMI will probably be required.
This industry-wide standard is partly due to requirements imposed by Fannie Mae and Freddie Mac. These government-sponsored mortgage buyers will only purchase loans from lenders if they meet certain standards, including PMI for loans with a loan-to-value (LTV) ratio above 80%.
The good news is that San Diego homeowners can cancel their private mortgage insurance policies once they reach a certain level of equity. (More on that in a moment.)
There is no official source that tracks the percentage of homeowners in San Diego who have mortgage insurance in California. But it’s probably a pretty high percentage.
In fact, it’s a safe bet to say that most people who use a mortgage loan to buy a home in the San Diego area end up paying PMI—at least initially.
To understand why, we simply have to plug in some numbers.
Private mortgage insurance in San Diego is usually required for home purchases with a down payment less than 20%. That means you would have to put down 20% in order to avoid PMI for conventional loans.
The median home value for San Diego County is over $900,000, while the median for the city itself is over $1 million. So let’s use $1 million as a nice round number.
A 20% down payment on a $1 million home would come to $200,000.
While the median income in San Diego County is higher than the national median, that’s still a huge chunk of money for the average home buyer. If the 20% down payment became a standard requirement, the pool of qualified buyers would shrink considerably.
But by taking on PMI, a home buyer in San Diego could make a down payment in the 3% to 5% for a conventional loan. For that same $1 million home, the down payment would now shrink to a range of $30,000 to $50,000.
PMI rates in 2024 can vary from one borrower to the next. Your credit score, the type of loan you use, and other factors can determine how much you pay in PMI each month.
According to the government-sponsored mortgage buyer Freddie Mac:
“While the amount you pay for PMI can vary, you can expect to pay approximately between $30 and $70 per month for every $100,000 borrowed.”
The table below shows what this range would amount to in dollar amounts, using some realistic loan sizes for the San Diego metro area:
| Loan Amount | Monthly PMI Cost |
|---|---|
| $700,000 | $210 – $490 |
| $800,000 | $240 – $560 |
| $900,000 | $270 – $630 |
| $1,000,000 | $300 – $700 |
| $1,100,000 | $330 – $770 |
Note: This table contains averages. Your PMI San Diego costs could differ from these examples.
Private mortgage insurance is one of the four main components that make up a homeowner’s monthly mortgage payment. Principal, interest, and taxes are the other three.
In a typical mortgage scenario in San Diego, the principal and interest form the bulk of the monthly payment, with PMI adding a smaller portion. The principal and interest might add up to several thousand dollars per month, while PMI might cost several hundred dollars.
But you also get a lot in return, including the ability to buy a home with less money down.
Homeowners can usually cancel PMI in San Diego when certain conditions have been met. Specifically, you must wait until your loan-to-value (LTV) ratio drops to at least 80%.
PMI cancellation can be done upon request or automatically. Over time, as you make regular monthly mortgage payments, your equity will grow while your LTV ratio declines.
If you’re wondering how to cancel PMI in San Diego, here are the thresholds needed:
You can track your equity level over time by regularly reviewing your mortgage statements to estimate your LTV. Also, if home values have risen in your area, you could order a new appraisal to see if your equity has increased more than expected.
Note: The above cancellation procedures apply to private mortgage insurance in San Diego, which is used for conventional home loans. FHA mortgage insurance works differently and is often required for as long as the homeowner keeps the loan. An important distinction.
There are a few alternatives to PMI that homebuyers in San Diego can consider to avoid the additional monthly cost, including the following:
FHA loans allow borrowers to make a smaller down payment (as low as 3.5%) without the need for traditional PMI. Instead, they require mortgage insurance premiums (MIP). FHA loans are easier to qualify for, particularly for first-time buyers with lower credit scores. However, MIP may be needed over the life of the loan, along with an upfront premium.
VA loans are available to eligible veterans and military members. If you fall under this category, you may qualify for a VA loan. These loans do not require PMI, no matter what your down payment amount may be. Plus, you may get more favorable loan terms.
The easiest and most obvious way to avoid PMI is to make a larger down payment of at least 20% of the home’s purchase price. Not only would this come with no PMI, but you can also reduce your monthly payments. However, given the high cost of homes in San Diego, it may be difficult to come up with such a large upfront amount.
In conclusion, PMI could allow you to buy a home in San Diego much sooner and with less money down up front. But it does add on to your monthly payments, so be sure to do the math and consider all of your financing options.
If you’re looking to finance the purchase of a home in San Diego, CA, we can help. Sammamish Mortgage has been in the mortgage industry since 1992, assisting borrowers in the Pacific Northwest and California. Visit our website to get an instant rate quote, or reach out to our team today to get the ball rolling on your mortgage application!
Whether you’re buying a home or ready to refinance, our professionals can help.
{hours_open} - {hours_closed} Pacific
No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.