-Mortgage insurance pays the lender a portion of the principle of the mortgage if the buyer defaults. Most lenders require mortgage insurance when the buyer pays less than a 20% down payment. The buyer pays the insurance premiums. “Mortgage insurance might seem like just another way for a lender to get your money,” says Marc Coons, the Paso Robles mortgage consultant, “But, it can benefit the buyer, too.”
- Mortgage insurance makes it possible for you to buy a home with a smaller down payment.
- It makes it possible for buyers to get better loan interest rates.
- If you fall behind on payments, or even default due to some unexpected circumstances, the insurance pays a portion of the mortgage to the lender, reducing the risk of foreclosure and protecting your credit score.
Mortgage insurance differs from mortgage life insurance, which pays off the mortgage if you die, or mortgage disability insurance, which helps make the payments in the event of a long-term injury, illness, or disability.
How does mortgage insurance work?
There are two primary types of mortgage insurance: private mortgage insurance (PMI) and government mortgage insurance. PMI is typically required for conventional loans. Government mortgage insurance is commonly associated with loans provided by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA).
Most FHA loans have a minimum down payment of as little as 3.5% and have easier credit qualifications. But, FHA loans also require mortgage insurance, regardless of the down payment amount. The insurance can be paid separately or rolled into the amount of the loan and mortgage payment. Working with the experienced Mortgage consultant, Paso Robles’ Marc Coons, can make the subject of mortgage insurance for FHA and other loans easier to understand.
The specific terms and costs of mortgage insurance vary depending on the loan program, the borrower’s credit score, and the loan-to-value ratio (LTV). It’s crucial for borrowers to carefully review and understand the terms of their mortgage insurance policy, including the premium amount, cancellation requirements, and how long the coverage will be in effect.
As borrowers make mortgage payments over time, they build equity in their homes. This increased equity, combined with appreciation in the property’s value, can eventually surpass the 20% equity threshold. Once this occurs, borrowers may be eligible to request the cancellation of their mortgage insurance, thereby reducing their monthly mortgage payment.
Understanding mortgage insurance, down payments, and interest rates
Mortgage insurance, the influence of the amount of the down payment, and interest rates are three of the more confusing things about buying a home. Working with the Paso Robles mortgage consultant streamlines the entire mortgage process, from the time you first apply for a mortgage until you pick up the keys to your new house. A skilled mortgage consultant, backed by Certainty Home Lending with access to hundreds of lenders, Marc, and his team connect home buyers with lenders, making the entire process run as smoothly as possible.
- The streamlined process starts with assisting you to prequalify for a loan, followed by completing a single application that Marc submits to all of the lenders who can meet your needs.
- Any and all of your questions are promptly answered, and complex topics like mortgage insurance, down payments, and interest rates are thoroughly explained.
- Marc and his team are with you every step of the way, responding to questions and requests from potential lenders and keeping you informed.
With over 17 years of experience as a mortgage consultant, Marc is committed to helping individuals and families. Recognizing that each customer has specific needs, Marc applies his experience, along with Certainty Home Lending’s superior “in-house-local” processing, underwriting, and closing functions, to assure a smooth loan process from application to moving in.
Services include:
- Mortgage loans and financing
- Conventional, Jumbo, FHA, USDA, VA, and 203(k)
- Construction loans
- Home purchase or refinancing
- Equity loans and HELOCs (lines of credit)