Ideally, traditional mortgage lenders want new homebuyers to have a 20% down
payment when purchasing a new home. Thus, if purchasing a $200,000 home, you
should be prepared to have $40,000 as a down payment.
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 recoup their money if a homeowner defaults on the loan. There are
various loans available to assist 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, the majority of the population is unable to save the recommended
down payment of 20%. In order to make owning a home possible, mortgage companies
created a particular mortgage insurance, (PMI), for people with less than 20% to
put down on a home. This insurance protects 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,
sometimes more. However, there are ways to avoid paying this additional
insurance. The obvious involves having at least 20% as a down payment. If this
is not an option, homeowner may agree 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 referred to as a piggyback loan or 80/20 mortgage loan, 100% mortgage
financing involves obtaining a 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 purchase with no money down, and no
private mortgage insurance.
Visit www.abcloanguide.com to find a list of reputable online lenders
for 100% mortgage financing. To qualify for 100% mortgage financing, you must
have good credit. In addition, homebuyers must be in a financial position to pay
closing costs. Of course, there are ways to avoid this out-of-pocket expense.
This option involves 103% mortgage financing, which is intended to assist
homebuyers with down payments and closing fees.
