What is Mortgage Insurance and Why You Might Need It: A Guide for Homebuyers
When you're buying a home, you'll likely hear the term "mortgage insurance" come up. But what is it, and why might you need it? Here's what you need to know:
What is Mortgage Insurance?
Mortgage insurance is a type of insurance that protects the lender in case the borrower is unable to make their mortgage payments. It's typically required if you're putting down less than 20% of the home's purchase price as a down payment. This is because lenders see borrowers who put down less money as a higher risk.
There are two main types of mortgage insurance:
Private Mortgage Insurance (PMI): PMI is a type of insurance that's required for conventional loans. It's typically paid as a monthly premium and is calculated as a percentage of your loan amount.
Mortgage Insurance Premium (MIP): MIP is a type of insurance that's required for FHA loans. It's paid as an upfront premium at closing and a monthly premium throughout the life of the loan.
Why Might You Need Mortgage Insurance?
If you're not able to put down a 20% down payment on your home, you'll likely need to pay for mortgage insurance. This can help make you a more attractive borrower to lenders, as it shows that you're willing to take on the additional cost of insurance to secure your loan.
Additionally, mortgage insurance can help you qualify for a larger loan amount than you might otherwise be able to afford. This can be especially helpful for first-time homebuyers who might not have a large down payment saved up yet.
Overall, mortgage insurance is an important aspect of the homebuying process to understand. While it can add to your monthly costs, it can also help you secure a loan and purchase a home that you might not otherwise be able to afford.
If you have questions about mortgage insurance or the homebuying process in general, don't hesitate to reach out to a mortgage expert or a member of the Expanse Real Estate Team for guidance.
Alberto Ceja 623-313-8534
Ruby Threlkel 623-326-0029