- January 30, 2018
- Posted by: David Jacobson
- Category: Uncategorized
What is Mortgage Insurance: How Can I Avoid it?
What is Mortgage Insurance: How Can I Avoid it?Mortgage insurance is one of the most misunderstood aspects of the home loan process. Being unprepared or uninformed about loan requirements can really make the home buying process more difficult. David Jacobson is the kind of lender interested in getting you all the information you need so you can make an educated decision regarding your home loan options. Today, we will be discussing mortgage insurance, how it works, and what you can do to avoid it.
What is Mortgage Insurance?
Mortgage insurance is designed to lower the risk to the lender of making a loan, in order to get you approved for a loan you may otherwise not qualify for. In general, borrowers who make a down payment of less than twenty percent will need to pay for mortgage insurance, though that depends on the type of home loan. The cost of insurance is included in your total monthly mortgage payment. Different loans have different requirements.
Conventional loans typically require private mortgage insurance (PMI). PMI rates vary depending on the down payment amount and the credit score of the borrower. Most private mortgage insurance is included in the monthly payment and requires little or no initial payment on closing.
FHA loans require mortgage insurance paid directly to the Federal Housing Administration. It is required for all FHA loans and costs the same regardless of your credit score. It can vary slightly depending on your down payment amount, however. FHA mortgage insurance also includes an upfront cost as well as a monthly payment.
USDA loans are similar to FHA loans but typically cheaper. You will pay for the insurance upfront as well as part of the monthly payment. If you are unable to pay the upfront mortgage insurance you can roll it into your monthly costs, but it will increase your loan amount and overall costs.
One of the best aspects of VA loans is that they are backed by the Veterans Affairs department and require no mortgage insurance. However, you will pay a funding fee that helps to keep the VA loan program available to military members. The amount of your funding fee varies based on a multitude of factors like length of service, and down payment amount.
Cancelling Mortgage Insurance
In many cases, if you have paid off a portion of your loan you will become eligible to cancel your insurance requirement. Often times twenty percent home equity is required however that depends on your agreed upon terms. Discuss this with your lender to find specifics.
Contact David Jacobson – OakStar Bank
If you are in the market for a home purchase in southwest Missouri, David Jacobson is the lender for you. As a home loan mortgage lender with over 25 years of real estate experience, we will make your loan experience as smooth and beneficial as possible. Contact David Jacobson today by phone or email to begin the home loan process.