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Mortgage Insurance for Lower Down Payment

We have to face it – there just isn’t as much credit and cash to go around today as there was a few months ago. In spite of that fact people still have to buy a home from time to time for a plethora of reasons. Some may be transferring to new locations or simply graduating, marrying and buying a home. In fact the National Association of REALTORS has a prediction of 4.8 million homes being sold this year by members and non-member agents.

Bigger Families Need Larger Homes

A few months ago, less than 3 years, it was possible for a wide range of home buyers to purchase a home without making any down payment. While some of that activity is to blame for the mortgage crisis the truth is well qualified buyers have always had access to loans which would not require as much of a down payment especially with the use of a company which insures the lender against loss. The mortgage insurance companies have been around for many years and are very good at evaluating risk to their own investors as well as the market place. True enough some of them suffered huge losses after the “bubble burst” (aka market correction) but others had been a little more cautious on the run up and therefore did not suffer as great a hardship as others.

Who does Mortgage Insurance benefit?

That’s a two sided answer. MI benefits the home buyer because it allows them to purchase a home with a much lower down payment thus retaining their liquid capital or simply to make a lower cash injection at the time of purchase. Considering the down payment on a $200,000 home at 20% would be $40,000 and MI will allow a buyer to acquire the property with a down payment of as little as $6,000 I would say that could be a great benefit to the buyer.

Mortgage Insurance also benefits the lender. In fact if the lender does their job right, and most do, if the buyer ever defaults on the loan the MI company will be responsible for indemnifying the lender according to the policy provisions. It is an absurd assumption that MI companies and lenders collude on foreclosures “just to get the home” since MI companies actually fight with the lender to do their best to keep from paying the claim!

How much does Mortgage Insurance cost?

This varies by credit score, loan amount, property type, and a couple of other factors. Today I priced a 97% loan for someone with a 680 score on a $200,000 loan in Georgia and the amount was around $200 per month. Considering that will keep $37,000 in the buyer’s pocket I would call that a real bargain!

Do I have to pay Mortgage Insurance for as long as I own the home?

Mortgage Insurance can be cancelled when the amount owed on the home is less than 80% of the current value of the property. It is up to the home owner to keep up with this and notify the MI company. Obviously an acceptable appraisal or valuation per the MI company’s guidelines will be required. Typically this is about 5 years after the purchase in a stable market.

More questions about Mortgage Insurance

I can answer your mortgage related questions about purchases in the state of Georgia. Simply use the Contact Me form or call me at my office at 770-818-4365.

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I am a multi-year veteran of the industry who has served in the highest offices in the industry. I can help you get the best deals and avoid getting ripped off!
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