The main benefit of mortgage insurance on conventional loans is being able to buy without 20% down. Â You can buy a home with as little as 3% down – and sometimes get lower rates than if you were to use 20% down. This allows you to buy a home sooner than if you had to save to get 20% down. You will start building equity in the home since you are able to buy sooner.
A lower down payment allows you to use your savings to remodel, upgrade or maybe just buy new appliances. One conversation I will have with buyers is to look at the home you are buying – are there things you need to fix, update or just want to change? Does it make sense to save some of your money to do those things? Â What will work better – a larger down payment or saving your money to fix things that need to be fixed. Sometimes we start the house shopping planning to put 5, 10 or 20% down but once you find that home you love, you may change your mind. It may need some things that change your decision on your down payment.
The higher your credit score, the lower your mortgage insurance will be- it may be cheaper than FHA mortgage insurance. It also can be cancelled once you reach 78% of the original loan value – talk to your loan servicer about the cancellation requirements. Sometimes you can cancel much earlier – it depends on your loan to value and also your payment history. Â Because mortgage insurance can be cancelled on conventional loans, it may make more sense to buy now with interest rates being very low.
There are programs that also can allow lower mortgage insurance – if you qualify for Home Possible or Home Ready, the mortgage insurance may be lower than a regular conventional loan. Â Talk to your loan officer about those requirements and see if you qualify. There are income limits on both programs but there are areas without income limits – see how it can affect you. The interest rate may be lower on those programs also – that can save you even more money!
Mortgage insurance can also be tax deductible – talk to your tax professional to verify if you can deduct those payments. Â If so, that can also save you money!
Clients will tell me they don’t want to pay mortgage insurance and I understand that, however, sometimes it makes sense to pay it and be able to buy now! Sometimes it makes more sense to pay mortgage insurance to be able to buy now rather than wait! It was designed to help you and lenders to purchase homes without 20% down – check into your situation and see what makes sense for you!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
