Unfortunately, many people do not have this kind of money lying around. For this matter,private mortgage insurance (PMI) was created as a way for mortgage companies to recouptheir money if a homeowner defaults on the loan. There are various loans available toassist people with down payments. In some instances, homeowners can obtain 100 %financing, and avoid PMI
What is Private Mortgage Insurance?
Because Americans are earning less money, and home prices are steadily increasing, themajority of the population is unable to save the recommended down payment of 20 %. Inorder to make owning a home possible, mortgage companies created a particular mortgageinsurance, (PMI), for people with less than 20 % to put down on a home. This insuranceprotects the lender if you default on the mortgage.
How to Avoid Paying Private Mortgage Insurance
On average, PMI may increase your mortgage payment by $100-- sometimes less, sometimesmore. However, there are ways to avoid paying this additional insurance. The obviousinvolves having at least 20 % as a down payment. If this is not an option, homeowner mayagree to a higher interest rate. Another tactic entails getting approved for 100 %financing.
How Does 100 % Mortgage Financing Work?
100 % mortgage financing makes it possible to buy a home with no money down. Also referredto as a piggyback loan or 80/20 mortgage loan, 100 % mortgage financing involves obtaininga first mortgage for 80 % of the home cost, and a second mortgage, or home equity loan,for 20 % of the home cost. Together, the first and second mortgage allows a home purchasewith no money down, and no private mortgage insurance.
No comments:
Post a Comment