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Buy a home with less money down using Private Mortgage Insurance
Saving 20% of a home’s price for a down payment is typically the biggest barrier to homeownership for most families. Private Mortgage Insurance can help you buy a home sooner and make the best use of your savings. In fact, the average home buyer can purchase a home ten years sooner with mortgage insurance and a five percent down payment, instead of waiting to save a 20% down payment.
What is Private Mortgage Insurance?
Private Mortgage Insurance is the easiest, most flexible and least expensive way to buy a home with a low down payment. It can help you buy a home with a down payment of as little as three to five percent instead of the 20 percent down payment lenders traditionally require for loans without insurance. Private Mortgage Insurance protects lenders and investors against loss if a borrower stops making mortgage payments.
What is the difference between Private Mortgage Insurance and government insurance?
Government and private (conventional) insurance programs are based on the same premise. For qualifying home buyers, conventional mortgage insurance has several advantages:
- Higher loan limits
- Faster loan approvals
- Less paperwork
- Lower premiums
- Wider variety of payment options
- Automatic cancellation
- More flexible qualification requirements
How does mortgage insurance work?
Private Mortgage Insurance allows the mortgage insurer to share the risk of foreclosure with the lender for a premium, which is paid by the borrower. If a borrower stops making mortgage payments, the lender uses Private Mortgage Insurance to help cover the legal and other expenses involved.
What does mortgage insurance do for me?
Private Mortgage Insurance has a wide range of benefits for many different borrowers.
- First time buyers can use Private Mortgage Insurance to overcome the largest obstacle to homeownership: coming up with a traditional 20 percent down payment. With Private Mortgage Insurance, first time buyers can buy a house and start building equity years sooner. It also eliminates the risk that the home will appreciate out of reach while the buyer is trying to save for a traditional 20 percent down payment.
- Trade up buyers can use mortgage insurance to consider a wider range of homes. If you have $15,000 in savings or equity in your current home, you can make a 20 percent down payment on a $75,000 house. With Private Mortgage Insurance, you can use that same cash to buy a $150,000 house with 10 percent down or a $300,000 home with 5 percent down (assuming you qualify).
- Both first time and move up buyers can put less money down and use their remaining cash for additional investments, home improvements, eliminating debts or college education expenses.
- Buyers who itemize their taxes gain increased savings from Private Mortgage Insurance. The larger loan amount that results from a low down payment boosts the mortgage interest deduction.
What types of loans can be covered by Private Mortgage Insurance?
Mortgage insurance covers a wide range of loans, including most fixed-rate 30-year and 25-year and under loans and many adjustable rate mortgages. Your lender can help you determine which premium plan is right for you and will make all the arrangements for obtaining insurance from the mortgage insurance company.
Who pays for mortgage insurance?
The borrower pays for mortgage insurance, usually as part of the monthly house payment. There are many payment options available, including monthly payments, annual payments and programs that require no cash from the borrower at closing for mortgage insurance. There are also one-time mortgage insurance premiums paid at closing which are typically financed into the loan amount or may be paid by the seller.
Can I cancel my mortgage insurance?
Yes. The Homeowners Protection Act of 1998 requires that your lender cancel your mortgage insurance at your request once you have reached a certain level of equity in your home. Or the insurance will be automatically canceled by your lender if you don’t request it. Your lender can provide you with the requirements for canceling insurance, which are set by the investor in your loan. Contact the company you send your mortgage payment to for details.
For more information
Two out of five families use mortgage insurance to become home owners. For more information on how mortgage insurance can help you buy the home of your dreams with a low down payment, check http://www.privatemi.com. The site includes calculators to help you determine how much sooner you can become a home owner and how much more house you can afford with mortgage insurance, as well as when your mortgage insurance will be canceled. |