If your down payment on a home/condo is less than 20 percent of the appraised value or sale price, you must obtain private mortgage insurance, also known as PMI, with your lender. This will enable you to obtain a mortgage with a lower down payment because your lender is now protected against any default on the loan.
PMI charges vary depending on the size of the down payment and the loan, they typically amount to about one-half of 1 percent of the loan. Mortgage insurance premiums are not tax deductible.
Keep track of your payments on the principal of the mortgage. When you reach the point where the loan-to-value ratio hits 80 percent, notify the lender that it is time to discontinue the PMI premiums. The Homeowners Protection Act of 1998, which took effect in 1999, requires lenders to tell the buyer at closing how many years and months it will take for them to reach that 80 percent level and cancel PMI. Lenders must automatically cancel PMI when the balance hits 78 percent.
enough money and your loan is a riskier loan than if you were to put down let's say 20 or 30 % on the
purchase price, so it basically insures the loan amount....
You see some other ways about how to finance the purchase of a home, it always all depends on your
income, your credit, your down payment and the total value allowed to buy....
You need to connect with a lender first not only to find out what is required from you, and how much money the lender will let you borrow, before you even start looking at properties. But also preferably
connect with a lender who will take the time to explain everything to you in detail, you want to be well
informed about the financial side and you want to be comfortable with the monthly loan payments including the taxes and as always consider your expenses and your income and your income security,
think what will happen if and when you lose your job and do not have one for several months...
Just take it step by step and get all the information you need, if you need the recommendation for
a good lender and a good Realtor to work with let me know.
Good Luck to you
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There are ways around this. Some lenders (I know a few), are able to qualify a buyer for a conventional mortgage (a standard home loan that usually requires 20% down) with only 10% down if the buyer qualifies by meeting other criteria. Another way is to ask for credits at closing. These credits can then be applied to your insurance premium upfront which gets you a nice discount as well. This is essentially getting the seller to pick up the cost of your insurance.
I would love to help! feel free to contact me if you have any questions.