Did you know that if you buy a home and use less than a 20% down payment you will be required to pay a mortgage insurance premium?
A Mortgage insurance premium is bought and paid for by you, the homeowner, but it doesn’t protect your best interests because the mortgage insurance premium protects the lender in case your mortgage loan goes into default.
Private Mortgage Insurance (PMI)
Thanks to the loan guidelines by Fannie Mae and Freddie Mac every home buyer is required to have Private Mortgage Insurance (PMI) when they will be applying less than 20% as the down payment towards their mortgage loan.
Keep in mind that the larger the down payment you are able to make when buying a home proves to the lender that you are more than able to handle the responsibility of a monthly mortgage payment and you will not be a default risk to the lender in the near future.
One important thing to keep in mind if you plan on choosing an FHA loan is that every FHA insured loan requires the homebuyer to have a mortgage insurance premium (MIP) because of the sometimes very small amount of cash that’s required to close the mortgage loan.
Although paying a mortgage insurance premium is an extra cost the good news is that it won’t last for the entire 30-year mortgage loan.
For all mortgage loans that were originated on or after June 3rd, 2013 the FHA now requires the Mortgage Insurance Premium to be paid for 11 years or when the loan-to-value ratio reaches at least 78%.
For confirmation on how long you can expect to pay a Mortgage Insurance Premium if you choose an FHA loan contact your mortgage lender today.
Contact Fred Sed Realty
To learn more about Mortgage Insurance Premiums or to view homes for sale across Southern California contact Fred Sed Realty today by calling us at (800) 921-9231 or click here to connect with us online.