What to Know About Mortgage Insurance
There are different types of insurance you may need when buying a home. Mortgage insurance is only required for certain homeowners.
What is Mortgage Insurance?
Mortgage insurance is required when your down payment is less than 20% of the purchase price. This type of insurance protects the mortgage lender in case you default on your loan.
How Much is Mortgage Insurance?
The cost of mortgage insurance may vary depending on the down payment size, your credit score and the price of the home. Typically, mortgage insurance may cost anywhere between 0.5% – 5% of the loan amount.
How Long do you Have to Pay Mortgage Insurance?
It depends. One option may be available is to pay the lender an up-front premium at closing that covers the full cost of the insurance. Another possible option is to have the insurance combined with your mortgage payment and paid on a monthly basis.
Mortgage insurance is not necessarily required for the entire loan term. For example, if you have a 10-year adjustable-rate mortgage with insurance, you will not necessarily be paying the insurance for 10 years. Once you accumulate 20% equity in your home, you can ask the lender to no longer require the insurance premiums.
Mortgage insurance may give some people the chance to purchase a home sooner than they thought because it allows them to put less money down and get a larger loan amount. Contact us today to discuss your down payment and loan program options!