Katherind M. Blahut, PLLCAttorney At LawCall 1-786-333-4260
All You Need to Know About Mortgage Insurance
Your mortgage insurance takes care of your lender by providing the assurance that he will get paid even if you somehow fail to pay your premiums in future. But, it also does something for you!Due to the presence of mortgage insurance, you can buy a house even when you do not have 20 percent to put down against the price tag of your favorite house.If you have no idea what mortgage insurance is all about, this guide will tell you everything you should know.Which are the various kinds of mortgage insurance that exist?Primarily, two kinds of mortgage insurance exist: government mortgage insurance and private mortgage insurance, also called PMI. Government mortgage insurance is designed to go with VA loans and FHA loans, while private insurance has the job of taking care of conventional needs. The kind of mortgage loan obtained by you will determine what sort of mortgage insurance you need. Who needs to get mortgage insurance?Although there is no rule set in stone regarding who is, or is not, required to obtain mortgage insurance, lenders mostly ask those borrowers to get mortgage insurance who fail to put down 20 percent or more of the house value in the beginning. If you are asked to get mortgage insurance, you can expect to pay premiums till the point your LTV ratio reaches 80 percent. Your LTV ratio is calculated by dividing your borrowed amount by your property value. For instance, if your house costs $100,000 and you take out a loan of $90,000 after paying 10 percent as down payment, your LTV will be 90 percent ($90,000 / $100,000). Note that when dealing with government loans, insurance is usually needed regardless of your LTV ratio.How much do you need to pay?Mortgage insurance rate depends, conventionally, on the percentage of down payment you pay and your overall credit score. Typically, you are expected to shell out about $30 to $70 against every $100,000 you borrow. That means, if you buy a house that costs $300,000, you will need to pay close to $150 every month. FHA loans require you to pay one mortgage insurance premium upfront, and then one every year, which is usually collected on a monthly basis. VA loans, on the other hand, do not require you to pay any annual premium. You only need to pay a funding fee or upfront fee.When should you pay your mortgage insurance?Most probably you will be expected to pay your insurance premium on a monthly basis, at the time when you pay your actual mortgage. But, some lenders are there who ask you to pay the same in lump sum during your closure. Sometimes the premium may be financed in your original loan amount, too.What is the purpose of mortgage insurance?Mortgage insurance is not something that benefits you directly. What it does, instead, is it safeguards your lender in case you fail to continue making your payments for some reason.Is there a way to avoid mortgage insurance premium?In most cases, you can refrain from having to pay mortgage insurance premium by putting down about 20 percent of the purchase price of your house, or more. You can also cancel the same after paying a certain equity amount.
Real Estate Law
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Katherine M. Blahut, PLLC
Katherine Blahut has been a board certified real estate lawyer for more than 15 years. She can handle any and all of your real estate needs.You can call her at: 1-786-333-4260