If you’re considering a home purchase with a down payment less than 20% of the home’s value, you’ve probably heard the words “mortgage insurance” or “private mortgage insurance.” Essentially, they’re one in the same. Mortgage lenders require mortgage insurance if a down payment is less than 20% of the home’s value OR if you’re refinancing a home with less than 80% equity. It’s a form of protection for the lender in case the property was to go into foreclosure.
Is this something extra I have to pay for?
Yes and no. When our loan officers work with you through the pre-approval process, they’ll help identify the mortgage product that is best for your financial situation. They’ll ask questions like:
- What is a comfortable monthly mortgage payment?
- How much do you have set aside for down payment? Closing costs?
- May I pull your credit?
They’re asking these questions to best gauge your financial situation, and to understand the maximum amount you’re comfortable budgeting each month. After pulling your credit and reviewing your documents, our loan officers will help you make an educated mortgage decision that will work for you! We work with our clients to ensure that your budgeted mortgage payment will cover your principal, interest, taxes, homeowner’s insurance, and mortgage insurance (if applicable).
It is important to note that there are methods to avoid mortgage insurance, however no two mortgage situations are the same. Everyone’s finances differ. If you’d like to learn about the options that are available to you, contact our team today! 833.354.5626