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.
View our recommended 100% financing mortgage lenders online.
Carrie Reeder owns ABC Loan guide, an online resource with information about mortgages for people with bad credit.
