FHA Mortgage Insurance… Why Do I Need That?
When it comes to first time home buyers something I hear a lot is….. What is Mortgage Insurance and why do I need it. The answer is very simple. It is there to protect lenders against losses that could occur if you were to default. This is not homeowners insurance! Homeowners insurance is there to protect you against a loss to personal property.
How To Pay FHA Mortgage Insurance?
When it comes to an FHA loan there are two ways to pay for your Mortgage Insurance, either upfront or monthly. Mortgage Insurance is required for all loans with less than 20% equity. Contact a me for more information on that.
The Benefits?
FHA Mortgage Insurance allows people to purchase a home with less than 20% down. If mortgage insurance didn’t exist lenders wouldn’t be willing to loan you the money. However, with FHA Mortgage Insurance there is a minimum down payment which is currently 3.5% of the purchase price.
Is there a downside?
The main problem with FHA Mortgage Insurance is it can add a significant amount of to your monthly payments... However FHA mortgage insurance is not based on your credit score or other factors like Private Mortgage Insurance, FHA Mortgage Insurance is a set percentage. That means FHA Mortgage Insurance can save you money when you compare the two.
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