Mortgage Insurance for Littleton Colorado Homes
Makes Low Down Payment Loans Possible!
Simply put, mortgage insurance protects the mortgage company against financial loss if a homeowner stops making mortgage payments. Mortgage companies usually require mortgage insurance on low down payment loans for protection in the event that the homeowner fails to make his or her payments. When a homeowner fails to make the mortgage payments, a default occurs and the home goes into foreclosure. The homeowner, lender and the mortgage insurer lose in a foreclosure situation. The homeowner loses the house and all of the money put into it. The mortgage insurer will then have to pay a percentage of the mortgage company's loss on the defaulted loan.
The mortgage company's decision to use mortgage insurance is driven by the requirements of investors in the mortgage market. Because of the losses that could occur, major investors require mortgage insurance on all loans made with low down payments. Although the cost of the mortgage insurance is paid by the borrower, the mortgage insurer works directly with the mortgage company.
Low down payment mortgages can be insured in two ways -- through the government or through the private sector. Mortgages backed by the government are insured by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) or the Farmers Home Administration (FmHA). Although anyone can apply for FHA insurance, the other two government mortgage guarantee programs are much more targeted. The VA program is limited to qualified, eligible veterans and reservists. The FmHA insures loans for the construction and purchase of homes in rural communities. Conventional financing is the alternative to obtaining a home loan backed by the government.
Some government insured financing places maximums on the loan amounts which can vary from county to county, and state to state. Private mortgage insurance is available on a larger scale of home loan types and there is no pre-set limit on the loan amount. Although variances between government loans and conventional loans are evident, all are based on the same concept: allowing families to get into homes with less cash down.
Another option to loans requiring mortgage insurance would be to obtain a 1st and 2nd mortgage combination. With the wide variety of loans available, home buyers can find the financing process quite overwhelming! That's why I encourage clients to meet with me early in the home buying stage so that together we can find the right mortgage that best suits THEIR personal needs!