Mortgage insurance adds an extra cost to your loan — sometimes upfront, sometimes monthly or, in the case of FHA loans, both.
But despite this drawback, mortgage insurance isn’t all bad. In fact, it can actually come with some major benefits in the right situation.
Are you prepping to buy a home? Here’s when a loan with mortgage insurance may make sense:
1. You have very little saved up for a down payment.
If you don’t have much to put toward a down payment but are set on buying a home, mortgage insurance can help you do it. Mortgage insurance policies protect the lender, compensating them if you fail to make your payments. This reduces the risk the lender takes on and allows them to make loans to less-than-perfect buyers — ones with lower credit scores or, in many cases, smaller down payments.
FHA loans, which always require mortgage insurance, come with down payments as low as 3.5%. If you’re willing to pay for Private Mortgage Insurance on a conventional loan, you can put as little as 3% down. And the best part? You can cancel PMI after you build up enough equity in the home.
2. Making a big down payment would deplete your savings.
Even if you have the cash to make a large-sized down payment, it’s not always the best move — especially if it would drain your savings dry. As a homeowner, you’ll have lots of maintenance, upkeep, and unexpected repair costs crop up, and having a flush emergency fund is critical to covering them.
Choosing a loan with mortgage insurance can help you purchase that home without depleting that much-needed financial safety net.
3. You want to buy fast.
Saving up a 20% down payment can take years — even decades, depending on your income and how much your monthly costs add up to. And renting for that long? That’s just throwing money down the drain.
If you’re eager to get out of the rent race and start building your own wealth (not your landlord’s), then mortgage insurance is a tool that can help.
Can mortgage insurance help you achieve your goals?
If you’re considering buying a home, a loan with mortgage insurance may or may not make sense. Need help deciding what’s the best move for your unique situation? Get in touch with Premier Nationwide Lending today. We’re here to help.
Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 700 State Highway 121 Bypass, Suite 100, Lewisville, TX 75067 NTFN NMLS 75333.