Many would be home-owners are focused on avoiding mortgage insurance. There are basically two ways to do this:
1) Down Payment
In this approach the borrower makes sure they make a large enough down payment to avoid mortgage insurance. Typically, this means a down payment of 20% or more on a Conventional loans. These loans have many requirements. Among them: very good credit history, higher credit score, a seasoned down-payment and several months’ reserves. Exact requirements vary by lender so it pays to shop around.
Co-buyers
$80,000 (20% of the typical $400,000 entry-level house these days) is a lot of money to save up. These days there is help if you are willing to take on a partner. This co-buyer who will share in the future appreciation of the home. With 3% to 10% from you, the remaining portion of the down payment comes from co-buyer who will join you on the loan but not on title.
2) Portfolio and Special Loans
These loans do not require 20% down payments and usually remain with the bank for the life of the loan. The loans typically have additional requirements. Things like the borrower must be a First Time Buyer, or are meeting some other criteria that places them in a particular category of borrower. They usually require 3% to 5% from the borrower (gift funds may or may not be allowed depending on the lender). And the loan may have a slightly higher interest rate.
Using either of these approaches means significant reduction of your monthly payments. Mortgage insurance will run you between $30 to $70 per month per hundred thousand borrowed. The exact amount depends on your credit history and score. Thus a $400,000 would avoid an additional monthly payment ranging from $120 to $280. Even at the low end, it would be nice to have that money available for other things.
If you already have some savings and are interested in pursuing either of these options to avoid mortgage insurance, get in touch at 760 622 5087 and I can get you on the right path to your own home.
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